This weekend already has a strange feel to it.
But that was last weekend. Ostensibly there’s nothing more to do, except for the PIIG nations to tap their aid, and for the ECB to soak up bonds on the secondary market, and then of course just cross your fingers.
Except there’s clearly a lack of confidence that this will work.
The FT reports widespread bond selling, including from the giants at PIMCO, which has liquidated all of its Greek and Portuguese debt.
So why are they selling when Greece has a backstop? Fears of restructuring — fears which the Deutsche Bank CEO only stoked further with his prediction that Greek would not ultimately be able to pay its debts in full.
“We think it is too risky to buy Greece and Portugal,” said the head of one of the largest US asset managers. “The chance of restructuring is too high. When there is default risk, you scale your exposure differently. There is no value. But even if there was value, our investors still don’t want us to invest.”
Ramin Toloui, a senior portfolio manager at Pimco, said the European Central Bank’s decision to buy government debt could be backfiring. Instead of encouraging private investors to keep their government debt, the programme might be leading to more sales, he said.
“The risk is that investors are using the ECB as a vehicle to exit their positions,” he said.
Of course that last line is a classic PIMCO-ism that really doesn’t say that much. Of course investors are selling to the ECB if the ECB is now participating in the secondary markets. But when the biggest bond gurus speak on record and say ECB participation is “backfiring,” that will send chills down the spines of other market participants.