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RANsquawk DAILY EUROPEAN OPENING NEWS – 21/02/12
ASIA
JGBs traded lower overnight (-17ticks at 142.58, at 0636GMT) after Eurozone finance ministers reached deal on Greece, depressing demand for safe-haven assets. (RANsquawk)
The Japanese Finance Minister Azumi has said the G20 is not yet at a stage where it can decide funding amounts for the IMF, reiterating that Japan and China share the view that Europe can make more efforts against the crisis. (Sources)
US
T-notes edged lower overnight (-9 ticks at 130.20+, at 0637GMT) as market participants reacted to reports that another deal on Greece has been agreed. (RANsquawk)
The House of Representatives followed by the Senate voted in favour of extending the payroll tax cut to the end of 2012, and also to extend long-term jobless benefits. President Obama was to sign the bill into law immediately. (RTRS)
EU
Greece and its creditors have reached a final deal on a second, enhanced rescue package for the country totalling EUR 130bln, officials close to the talks have said. (Sources) Officials said the deal will require Greece's private creditors to take a deeper writedown on the face value of their EUR 200bln in holdings than first agreed. The haircut on the face value of privately held Greek debt will now be over 53%. As a result of the measures adopted, the creditors now assume that Greece's gross debt will fall to just over 120% of GDP by 2020, from around 164% currently, according to the officials. The coupons on new bonds offered as part of the PSI programme will be 2% to 2014, 3% over 2020 and then 4.3%.
EU's Juncker has said Greece is to launch the debt swap in the coming days, adding that the rates on bilateral loans will be lowered. This rate cut will shave EUR 1.4bln off Greek debt. Juncker further commented that the Eurosystem Greek bonds will not suffer losses. (Sources)
Some Euro-zone governments said they would accept a Greek debt/GDP ratio of 123-125% by 2020, but the IMF stated that the debt/GDP ratio should not exceed 120% by 2020. (RTRS) The IMF also said it sees Greek growth in 2014.
EU's Rehn has said Greece is to set up a segregated account for the aid flows. (Sources) Rehn has further commented on the future of the EFSF and ESM, saying it should be possible to combine the two funds, amounting to EUR 750bln of free resources. The EFSF's Regling has said the EFSF will largely fund the second Greek bailout, and is to raise money in a "cashless way"
According to a Troika debt sustainability analysis report released last night, Greek debt could reach 160% of GDP in 2020 should the recession deepen and structural reforms are not carried out. The report said the baseline scenario for the debt/GDP ratio is 129% in 2020, but could be 120% should the ECB and other central banks take action. (RTRS) Furthermore, under the Greek debt swap, the PSI would get a 3% coupon on bonds maturing 2012-20, and a 3.75% coupon on bonds maturing after 2021, plus an additional GDP-linked payment capped at 1% of the outstanding amount of new bonds.
The ECB is to pass up profits is has made from buying Greek bonds over the past two years under the SMP in an effort to lighten Athens' debt burden, according to a senior Eurozone official. (RTRS)
The German Finance Minister has said he is very confident a majority in the Bundestag will approve the Greek rescue package. (RTRS)
FX
Australia's RBA have said there is scope to cut rates if demand weakens materially, adding that for the time being, overall demand growth is firm and GDP growth will remain close to trend for the next 2 years. The Central Bank have also said that inflation is consistent with the 2-3% target. The RBA further commented on the AUD, saying that it has appreciated despite a softening in commodity prices, adding that sovereign debt buying is key influence on the currency. (Sources)
GEOPOLITICAL
Israeli leaders told visiting US officials that economic sanctions must be further toughened to stop Iran from moving ahead with its nuclear program. (Channel 2 News)
COMMODITIES
WTI Crude futures are up USD 1.70 at USD 105.30 (price taken at 0640GMT), following news that a second Greek bailout package has been agreed upon as well as further tensions in Iran. (RANsquawk)
According to the Iraqi planning minister, Iraq could lose more than half of its oil-exporting capability if neighbouring Iran shuts the Strait of Hormuz shipping lane, adding that there are no immediate alternatives that would make up the shortfall. (RTRS)
Japan's Trade and Foreign Ministers have said they have not yet reached an agreement with Washington on how much they will cut Iranian crude imports to win waivers from US sanctions to starve Iran of oil revenue. (RTRS)
Iran has offered India extra crude supplies on revised terms as international sanctions tighten. It is unlikely these revised terms are a discount in pricing, but consist of flexibility in the types of grades offered, loading dates and a loosening of credit for Indian refiners. (Sources)
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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
