Sovereign Credit Commentary

It looked for one moment that the long-awaited credit event on Greek sovereign CDS was finally about to happen.

The agonizing wait for the Greek bailout to be approved finally came to an end about 3am on Tuesday Feb. 21. The Eurogroup of finance ministers signed off the deal after receiving the assurances it had asked for.

Here in the sovereign credit markets we are no strangers to Greece-induced volatility, so not many would have been surprised to see spreads oscillate on the various headlines that hit the wires.

The sovereign credit markets were beholden to events in Greece throughout the week, as they were to a lesser extent the previous week. Perhaps it would be more accurate to say ‘non-events,’ given the dearth of real news emanating from the protracted bailout discussions in Athens.

After a strong performance in January, the sovereign credit market began the current month on a relatively quiet note.

After a strong performance in January, the sovereign credit market began the current month on a relatively quiet note.

The negotiations for the appropriate haircut for private sector involvement in a voluntary Greek debt restructuring continue.

Barring a capitulation next week it looks set to be a relatively strong January for sovereign credit and credit in general.

Participants in the sovereign credit markets haven’t had much to go on in 2012, so when a relatively important event occurred they seized on it.

It has been an inauspicious start to the year for the sovereign credit markets. A rally on the first day of trading proved ephemeral as the old bugbears of the debt crisis weighed on sentiment.

Last December, Merriam-Webster announced that the Word of the Year was ‘austerity.’

The optimism that was evident last week dissipated rapidly as it became clear that the European Union had failed to deliver the “big bazooka” the markets had been hoping for.