18/06/2012

BONJOUR ET BONNE SEMAINE...

de MONFINANCIER...

 

APRÈS LA GRÈCE, L'ATTENTE DU SOMMET EUROPÉEN

On passe d'une attente à une autre. La catastrophe grecque ayant été évitée de justesse, les marchés attendent maintenant l'issue du sommet Européen des 28 et 29 Juin. Un sommet qui devra déboucher sur des résultats concrets. En revanche personne n'attend rien du G20 qui s'ouvre aujourd'hui au Mexique.

 

LA GRECQUE CHOISIT LA ZONE EURO
Syriza a fait un score spectaculaire, mais n'a pas emporté la première place. La Nouvelle Démocratie de Samaras a obtenu le bonus des 50 sièges de la première place et peut former une coalition avec le PASOK. Ce n'est pas encore gagné, mais on imagine mal les partis dits "institutionnels" refuser la coalition. La Grèce va chercher à obtenir une bouffée d'oxygène en matière d'austérité. L'Europe et même l'Allemagne sont prêtes à lui offrir.

EST-CE QUE C'EST UNE BONNE NOUVELLE?
A court terme oui. Ce matin si Syriza avait gagné, les marchés auraient plongé, mais les banques centrales seraient intervenues massivement. A moyen et long terme non. La Grèce n'a pas sa place dans la zone euro et elle va encore nous coûter des dizaines de milliards d'euros.

LE G20
Les grands de ce monde se réunissent aujourd'hui au Mexique. L'avantage de ce G20 c'est qu'il n'y aura aucune déception car personne n'attend aucun résultat... Tous les pays vont faire la morale à l'Europe qui ne parvient pas à régler ses problèmes et a déstabilisé la croissance mondiale et l'Allemagne va être seule sur le banc des accusés....Encore un G20 pour rien.

L'AUTRE ÉLECTION
Grand chelem pour le président normal. Et en plus il va avoir la paix à la maison puisque son ex a été battue. Quant à François Bayrou, je me pose juste une question: à quel moment un homme qui a pris la direction d'un parti de gouvernement puissant, l'UDF, pour l'amener à une quasi-disparition a t'il la décence de se retirer?

PAS DE REPRISE AUX ÉTATS UNIS
Dossier du Wall Street Journal sur l' essoufflement de l'économie américaine avec des consommateurs qui réduisent leurs dépenses, de plus en plus d'Américains qui demandent des allocations chômage, la production qui ralentit et la confiance des ménages qui chutent tout cela obligeant les prévisionnistes à abaisser leurs anticipations de croissance.

L'EFFET BOLLORÉ
Vincent Bolloré va rejoindre le conseil d'Administration de Vivendi. Ce sera un catalyseur pour de la création de valeur dans ce groupe qui se cherche. Un découpage du groupe est possible avec la vente d'Activision et un éventuel rapprochement entre SFR et Bouygues. A suivre.

LA JOURNÉE CARREFOUR
Avec la première Assemblée générale du nouveau patron, Georges Plassat. Compte tenu de la performance du groupe depuis quelques années, il va y avoir de l'ambiance!

UNE TABLETTE DE PLUS
mais pas n'importe laquelle. Microsoft se lance à la poursuite d'Apple et de l'IPAD avec sa propre tablette Windows 8 au prix de 150 à 200 dollars.

 

UN OUF DE SOULAGEMENT MAIS PAS D'EUPHORIE

La Grèce n'a pas choisi de sortir de la zone euro. On a évité une panique sur les marchés ce matin mais on ne peut pas dire que ce soit encore l'euphorie. A se demander si le fait que la Grèce reste dans la zone euro est considérée comme une bonne nouvelle et si les investisseurs ne sont pas déçus qu'il n'y ait pas une intervention massive de liquidités des banques centrales.

Une hausse ce matin, mais pas de vraie euphorie après l'élection Grecque
C'est vrai qu'on aurait pu s'attendre à une véritable envolée ce matin sur l'Asie et à l'ouverture de l'Europe pour saluer la défaite de Syriza le parti anti européen. Une certitude cependant. Si Syriza avait gagné, on aurait eu une vraie débâcle. On y a échappé, c'est déjà ça. D'autre part, rappelons que les marchés ont bien progressé depuis quelques jours comme si ils avaient écarté le scénario catastrophe. Rappelons que même la Bourse d'Athènes a progressé de 15% la semaine dernière. Les investisseurs vont donc rester prudents jusqu'à qu'il y ait un accord sur une coalition pour gouverner. Mais ils resteront toujours sceptiques sur la Grèce. Les partis qui feront partie de la coalition sont tout de même les partis qui ont gouverné depuis des dizaines d'années et qui ont mis la Grèce dans l'état où elle est.

On va peut-être aussi se refocaliser sur le problème Espagnol aussi
Cette échéance Grecque étant levée pour quelques semaines, ou quelques mois, pas plus, car il va quand même falloir sérieusement réfléchir à faire sortir ce pays de la zone euro un jour, on va à nouveau être confronté aux problèmes espagnols, italiens et à l'affrontement entre la France et l'Allemagne. Un nouveau compte à rebours va commencer. Celui du sommet Européen du 28 Juin et cette fois-ci les Européens ne pourront pas se contenter de déclarations d'intention. Ils doivent parvenir à un véritable accord sur des véritables mesures de sauvetage des banques, de financement mutualisé, de réformes structurelles. ET ce matin il y a peut-être aussi une petite déception, car finalement une catastrophe en Grèce aurait entraîné une intervention massive et concertée de toutes les banques centrales du monde entier.
Cette injection massive de liquidités dans tous les pays que le marché attend depuis quelques jours
Si Syriza avait gagné, les banques centrales seraient intervenues dès ce matin. Elles vont probablement décider d'attendre. Soit la fin du G20 qui commence aujourd'hui et qui va se transformer en tribunal anti européen et anti allemand et dont on attend peu de mesures concrètes, soit la fin du sommet Européen si des mesures concrètes sont adoptées. Mais ce n'est que partie remise, car les banques centrales n'ont pas d'autre choix que d'ouvrir à nouveau la pompe à liquidités. Avec le résultat des élections Grecques, on a gagné quelques jours, mais pour que le marché devienne optimiste il va falloir que l'Europe prenne une décision sur son avenir, sans céder à la facilité ni tomber dans la médiocrité.

ET VOICI LES COMMENTAIRES DE MORGAN STANLEY...

18 June, 2012
Greek Election and the Euro Membership
Drachmageddon Avoided?

 

 

“Our currency, but your problem”

John Connally, US Secretary of the Treasury under President Nixon

 

·         The Greek election is, symbolically, also a referendum on Greece’s eurozone membership, in our view. And we have always thought that a lot is at stake not only in Greece. The ramification of an exit, for the eurozone as a whole, would be way more far-reaching than the market anticipates.

 

·         The words of former US Treasury Secretary John Connally, who about 40 years ago famously told European finances ministers in Rome that the dollar is “our currency, but your problem”, seem to resonate quite loudly – in a different context – in today’s European policy circles.

 

·         Greece’s team managed to stay in the European Football Championship and will play the quarter final with Germany no less! With the vote counting virtually over, this augurs well for Greece remaining in the eurozone for the time being, and for the formation of a pro-bailout government – now that ND and PASOK, the two main centrist parties, have sufficient support in parliament, according to preliminary data.

 

·         Should they form a coalition, the eurozone finance ministers might allow some mild renegotiation of the adjustment programme, perhaps encompassing a reduction of the interest rate and an extension of the repayment schedule of the official loans. This might lower the probability of a near-term eurozone exit.

 

·         But not much is resolved from a medium-term perspective. Solvency is far from assured and, when Greece approaches a balanced primary budget a year from now, the incentive to attempt to renegotiate the programme even further, threaten default, or even an exit from the currency union, might rise again.

 

Pro-bailout camp winning

 

ND and PASOK have the numbers: With the vote counting virtually over, preliminary data indicate that the two main centrist parties supporting the bailout have sufficient support (162 MPs) in the 300-seat parliament to form a government, at least in principle. Based on more than 99% of the votes, the leading party ND won 129 MPs, the second, SYRIZA – which opposes the bailout – 71 MPs, and the third, PASOK, 33 MPs.

 

What happens now: ND – which won the election – will also get a 50-seat bonus, which stays with the leading party even if it doesn’t succeed in forming a government. Today the president of the Greek republic will give ND a three-day mandate to form a majority supported cabinet. If unsuccessful, then the second party also has three days. Then the third party. Failing that, the president has a last chance to attempt to form a coalition government, or he will have to call a new election, which can only take place after about one month.

 

What it all means for the probability of a eurozone exit: To the extent that a government willing to cooperate with Europe emerges, the probability of a near-term eurozone exit, which we put at 35% over 12-18 months, will diminish – regardless of whether this government can comply with the conditions (see Headed for a Euro Divorce? May 24, 2012). This is because Europe could at least say that Greece is ‘back on track’, perhaps with a slightly different programme given a deeper recession than expected; and the Greek politicians can present a somewhat milder adjustment path to the Greek people.

 

OSI on its way… We think that the interest rate charged on the European loans is likely to be decreased further and the repayment period probably extended. We estimate that yearly interest payments on the bailout loans to the eurozone countries could be reduced by up to

 

€5bn on average in the following years. In a sense, this is a mild form of official sector involvement and is likely to give Greece some respite by improving debt service and, to some degree, sustainability prospects. Similar adjustments have already happened with both the first and second bailout packages.

 

…and some pro-growth measures… According to a press report in the Financial Times (June 15), the chances are that EIB financing to fund Greek public investment might also be provided. Under this scheme, Greek SMEs might benefit from EU development money to back EIB loans to Greece. The EU might take the first loss in any failed loans, thus allowing the EIB to increase the scale of its lending.

 

…but fiscal path unlikely to change radically: Yet we believe that only a slightly smoother fiscal adjustment will be offered – if at all. The chances are that even though there might be some rethinking of the deficit-reduction targets, or the timeframe to achieve them, the major building blocks to fix Greece’s public finances and structural problems will stay.

 

Risk I: Even though the election outcome appears to be such that there are the numbers to form a pro-bailout government, whether this happens in practice remains to be seen. One risk is that PASOK leader Venizelos, according to a press report by Bloomberg (June 17), seems keen to see a broad national-unity government, encompassing not only pro-bailout ND, PASOK and perhaps the smaller Democratic Left, but also anti-bailout SYRIZA. Thus, the risk that such negotiations fail and lead to an inconclusive outcome remains high. Should this happen, markets might perhaps price in a higher probability of a near-term eurozone exit.

 

Risk II: The list of prior actions that Greece needs to comply with is long and substantial. The IMF Memorandum of Understanding published on March 9, 2012, says that “prior to the first disbursement of the new programme, the Government adopts the following measures, through a supplementary budget” (see here). These measures amount to about €3bn, or 1.5% of GDP. And “some 7% of GDP in additional measures will be needed to attain the 2014 fiscal target”. Even though the Troika might make some small concessions, there’s a high risk that the loan tranche is disbursed with some delay, given that we are running at least six weeks behind schedule for Greece’s ability to make all domestic payments.

 

All good then?

 

Solvency far from assured: The new bailout plan would put Greece on a more sustainable debt path in the medium term, we think. However, apart from several structural deficiencies yet to be addressed, even if the challenging goal of roughly 120% debt/GDP in 2020 were eventually met (we expect 140%), this would still be far from the 90% threshold that we deem to be sustainable for a country with a twin deficit yet to correct in full (see On the Greek Debt Restructuring (Part I), February 22, 2012).

 

The inescapable reality is that Greece needs funding… With interests of (foreign, mainly official) creditors and (domestic) voters not that aligned, one might wonder whether the incentive to attempt meeting the Troika’s demands depends on the fact that Greece, having a primary budget deficit for at least one more year, needs funding. Since funding doesn’t come from the market, it has to come from the official lenders.

 

…things might change when Greece comes close to make ends meet: As long as the primary budget balance is in deficit, the incentive to, say, restructure is not really there because, with the government now unable to fund the primary budget deficit, the savings required to balance the books will be substantial anyway. However, when the primary budget is back in surplus, Greece might be tempted to seek further renegotiation, threaten default, or even ask the question of eurozone membership, especially if it becomes too evident that the future pace of expansion of the economy is too low to sustain the debt-servicing costs.

 

Balancing the books further down the line could change the incentives: The cost of austerity is a deep recession. This affects the domestic population, which has a saying in the political process. The cost of pursuing other policies, from attempting to renegotiate the terms of the adjustment programme to defaulting or even asking the question of eurozone membership, has an impact on the creditors (and the future borrowing costs), which are mainly outside of Greece. They don’t vote.

 

What’s the key trade-off: In essence, a country would choose to, say, default on its domestic debt, instead of enduring a painful domestic adjustment, if the cost of the latter exceeds the cost of the former. The same applies to milder (renegotiation of the terms) or harsher (attempting an exit) options. Basically, if a large share of government debt is held by foreigners (as is the case for Greece), a default might seem more palatable, as the cost on the domestic population would be smaller. So while the ‘Drachmageddon’ might have been avoided for now, there’s still a latent risk that it might happen in the future. Because of this latent risk, some damage to the Euro, we think, might even be permanent.

Our strategy views

 

1. Greece(Paolo Batori, Robert Tancsa)

 

Bond prices likely to rise to pre-election levels: To the extent that a pro-bailout government emerges, such outcome would take us to a political backdrop similar to that prior the election on May 6, when the market didn’t perceive the risk of a eurozone exit as being imminent. Hence, the bond market is likely to price out, to some extent, the risk of a eurozone exit and a hard restructuring scenario (principal reduction) in the near term. We would expect the GGB strip price to climb back towards the pre-election levels of 19-20.

Bond market technicals are supportive: Other factors are likely to play a significant role as well, we think. In particular, we believe that, while the pace of selling from continental European long-only accounts has intensified following the political deadlock after the first election, supply pressure is likely to diminish in the coming days, in our view, to the extent that a pro-bailout government emerges.

 

Bond Prices Are Set to Rise As the Tail-Risks Are Priced Out

Source: Bloomberg, Morgan Stanley Research

 

2. Other eurozone sovereigns (Laurence Mutkin, Elaine Lin)

 

What’s the read-across for other eurozone sovereigns: A positive outcome could diminish ‘flight-to-safety’ bids on Germany, whilst non-German core countries should benefit and peripheral countries remain while we wait for the Spanish bailout package details.

 

Short German CDS Basis or German swap spread: Bunds likely to see a reversal of ‘flight-to-quality’ bids and Germany would underperform against swap. At the same time, concerns about contingent risk to Germany should fall, especially via the CDS market, where the implied default probability is extremely high relative to that priced in the bond market. Short German CDS basis positions should benefit from both the outperformance in the CDS market and the underperformance of Bunds vs. swaps.

 

France to benefit – 2s10s France vs. Germany flattener: A positive outcome of the Greek election, i.e., the pro-bailout countries forming a government, would lower the probability of realising contingent liability for core countries, and lead to continued support and ‘yield chasing’ in the non-German core. France should benefit, given its yield pick-up versus Germany and its cheap valuation relative to other core and semi-core countries. We express this view via France 2s10s flattener versus Germany, as tightening should imply bull flattening of the French curve versus the German one.

 

Daniele Antonucci, Senior European Economist

Paolo Batori, European Head of EM and Global Head of Sovereign Credit Strategy

Laurence Mutkin, Global Head of Interest Rate Strategy

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