Tags: Hans Olsen | Greece | CDS spreads | yields

With No Signs of Panic Over Greece, Where's the Crisis?

By    |   Friday, 26 June 2015 06:50 AM

Hans Olson, of Barclays, asks, “What if you gave a crisis and nobody panicked? You look at CDS spreads, or yields, the VIX, markets; nothing there.” He went on to say that in all the discussion of reforms, such as in pensions or the VAT, “What they’re not talking about is asset sales.” He referred to the Hellenic Republic Development Fund, which was put together five years ago to privatize assets. He observed that out of 8,000 deals they’ve considered, they’ve only completed 40 and only received three billion pounds in cash, which would be 1% of the debt. Olson recounted that when he called the Fund in Athens to ask a followup question on a presentation, they refused to respond without the submission of a written form. Olson concluded, “I think that’s what we’re dealing with.”

Next, Matthew Beesley, PM and Head of Global Strategies at Henderson Global Investors, attributed the interest in high-yield investments to the prevailing monetary policy based on low interest rates. He sees the stress that has developed in this market as “a leading indicator of things perhaps getting a little tougher from here.” He stressed the need to be “very selective” in picking high-yield stocks and bonds at this stage of the market.

Peter Boockvar, of The Lindsey Group, commenting on warnings by Carl Icahn about the state of the fixed income market, noted that markets can remain overvalued for some time, but Boockvar warned investors against ignoring such warnings, “whether they’re early or late.” Tony Crescenzi, EVP & PM at Pimco, pointed to expectations in Europe and Japan for a policy rate of about 1% looking out five years or so, “and this is the safety net that supports risk assets going forward.” He defended the high-yield market on the ground that only 6% matures in the next three years, so the default rates should be no more than 2%. Boockvar remained unconvinced and repeated that he agrees with Carl Icahn and thinks there is a bubble, and “the air is coming out of the fixed-income market.”

Finally, Fast Money traders debated whether Icahn’s comments about an overvalued market sparked Wednesday’s selloff. The group didn’t go that far, but Brian Kelly added his own perspective that he thinks Icahn is saying the high-yield market is “a disaster waiting to happen,” and Kelly warns that if that should occur, the disaster would not be contained within the high-yield market. This writer would add that one is reminded of assurances Federal Reserve Chairman Ben Bernanke gave before the 2008 crisis that any bursting of the housing bubble would be contained within that market.

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Hans Olson, of Barclays, asks about the Greek debt negotiations: "What if you gave a crisis and nobody panicked? You look at CDS spreads, or yields, the VIX, markets; nothing there."
Hans Olsen, Greece, CDS spreads, yields
Friday, 26 June 2015 06:50 AM
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