Friday, April 9, 2010

Update. It appears likely the IMF will bail out Greece

From what I'm hearing, it looks like Greece will be offered stupid-low attractive financing with the help of the International Monetary Fund.

After Goldman Sachs threw in the towel on an attempted new bond offering, and Greek debt traded to yield 7.5% this week, it looks like the IMF will step in.  They will use US taxpayer money (as the biggest backer of the IMF) to let Greece borrow at the "SDR" rate.  That is the "Special Drawing Rate" for basket case nations that simply do not understand the flow of capital and interest rate risk.

With the SDR at .26% and adding in a .5% service charge, Greece will be borrowing BELOW what the US borrows at, if the rumored 300basis point spread is true:

And so it goes with Greece.  They lied their way into the EU monetary union, piggybacked to borrow for artificially low rates, and now simply change who they're piggybacking off of:

Copyright 2010 AlphaNinja

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