The market consensus seems to be that Greece will fulfill its payment obligations with the IMF tomorrow. The next deadline, which is likely to bring new tensions to the table, is June (when Athens is supposed to make another payment of €1.5 billion). Another €1.5 billion needs to be settled by September in four tranches.
“In our opinion, chances are that this eventual default of Greece may linger over the summer, which will be an obstacle to the consistent performance of European stocks,” analysts at Bankinter explained on Monday.
Even if Greece were not to honour its obligation with the IMF, rating agencies would still not consider it as a formal default.
Furthermore, although a country stops having access to the IMF’s financing in case of default, the truth is there is a 3-month lapse until the IMF’s Council Board formally calls it a non-payment. And it’s only from that moment that additional funding is blocked.
What can we expect from the markets in the coming days?
“Should our base-case scenario materialise (deal and no Grexit), we would expect a relief rally in European corporate bond markets led by peripherals, particularly in subordinated bank debt, corporate hybrids and high-yields,” UBS sources said.