From Banco Santander, a briefing on yesterday’s events to enlighten our Wednesday:
“It could not be otherwise, the euro zone (EZ) was trying to build a firewall for well-known reasons. And it is not only to stop the markets’ downturn, it is also associated with an attempt to cut the cost of the bailout for the taxpayer.
“Late on Tuesday the Financial Times (FT) revealed, by quoting sources within the EU, that seven of the 17 countries of the EZ object to the extent of the haircuts agreed on July 21 for banks with exposure to Greek debt (NPV -21%). It seems that even within Germany itself there are divisions. With this prelude of scarce unanimity and with new risks for banks, it is hard to think that volatility will disappear in the world of credit.
“In addition to this, a new report from Moody’s warns about the future prospect for Italian banks and states that they will remain negative over the next 12-18 months.
“The CDX closed flat in the US after the publication at the last minute of the FT rumour while Europe was witnessing again a hopeful day for the primary market (Peugeot, Casino, HVB,…) and indices closed with clear improvements: Main-7bp, SenFin-1bp and SovX-20 (with Spain -33bp and Italy -55pb, having the best relative performance after comments began to circulate about the prossible creation of a leveraged EFSF).”