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It's a tense standoff between Greece and its international creditors. Unless both sides dramatically return to the negotiating table, Greece looks set to default on its €1.5 billion International Monetary Fund (IMF) loan payment on June 30. While European Union (EU) leaders are still trying to coax Prime Minister Alexis Tsipras back to the table (though they have made no new concessions), the Greek hard-line stance appears increasingly entrenched, regardless of the potential consequences.
Greek government bond trading has virtually ground to a halt, with electronic trading platforms temporarily suspending trading. The players are few and far between. The markets have been raising odds of an exit, but it is still not the base case. The level of uncertainty is dizzying; there are too many questions and too many potential outcomes for the markets to think clearly. Liquidity in Italy and Spain has deteriorated, as evident by the price action. However, yields and spreads have been relatively contained. There has been very little real contagion. Even the euro has been desensitized. Yet the markets remain cautious. We could be on the verge of receiving a third bailout program, which could give Greece and the markets some time. It won't be smooth. But even stable uncertainty would be a welcome change to all the noise. By Laura Sarlo, Senior Sovereign Analyst, Aimee Kaye, Sovereign Analyst and Marianne Winkleman, Director of Global Bond, EM and FX Trading
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Market conditions are extremely fluid and change frequently.
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