Luckily the capital markets don’t need such a rudimentary way of sensing danger — they have the European Central Bank.
On Thursday the ECB added 13 state-sponsored companies to the list of those institutions whose debt it is allowed to buy.
The move took the market by surprise and fuelled speculation that the central bank will soon add bona fide corporate bonds to its €60bn a month purchase programme.
On June 3, Mario Draghi said the programme was “proceeding well”, inflation expectations were up, “financial conditions” had eased and he saw no need to expand the purchases.
So his renewed thirst for bonds reflects one thing — the rising probability of a Greek exit from the eurozone. The ECB’s first response to that event, which now hinges on an unfathomable referendum on Sunday, would be to flood the market with liquidity to hold down periphery borrowing costs.
Sure, the ECB has been struggling to make its monthly target, but giving the markets a reminder of the bazooka at its disposal three days before the crucial vote is a little too coincidental.
And they aren’t the only ones worried. The IMF has relinquished its role as loan shark and gone back to its stated goal of “ensuring the stability of the international monetary system”. It pleaded with Greece’s European partners to grant the country debt relief and warned it will need another €60bn of aid in the next three years.
The added companies only put another €66bn of outstanding bonds in the ECB’s crosshairs, but if Greece goes, they are going to need every euro they can get their hands on.