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Tuesday, December 18, 2012

Cyprus To Default

According to Cyprus Finance Ministry Secretary Christos Patsalides Cyprus is going to default within days unless it receives Euro300BN.

Oddly enough there are some people who have been taken by surprise by this development.

I don't understand why, in August I wrote the following:
"Cyprus has barely managed to sell Euro23.1M of government bonds.

It achieved a "bid to cover ratio" of 1 (ie there were only just enough "punters" prepared to buy them), at a yield of 7% (the last auction in June achieved a yield of 6.25%).

A yield of 7% is "the point of no return"; it is the level at which Greece, Portugal and Ireland went with their begging bowls to others asking for a bailout.

Why is Cyprus having problems?

Around 40% of its largest banks' exposures are to Greece
."
Therefore this should come as no surprise to anyone.

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