Greece And California Death Match

The spreads between Greece/German bunds and California/30-yr Treasuries are widening. Investors are demanding more for carrying the risk. The downgrade in CA paper yesterday will give the Greek bonds are run for their Drachmas…

According to a Reuters report, the spread between 10-year Greek government bonds and the benchmark Euro zone German bunds has risen to an 11-month high of 298 bps, up from 265 the day before. The high is 300 bps set about a year ago. The equivalent for Spanish bonds is trading at 81 bps premium over German bunds.

According to an article in Bloomberg, the spreads between CA debt and the 30-year Bond are also widening and PIMCO was quoted as saying that the CA debt crisis is headed back to disaster levels.

Bloomberg: “A taxable California bond that matures in 2039 traded today for an average yield of 7.79 percent in blocks of more than $1 million, the highest since Dec. 28, according to Municipal Securities Rulemaking Board data. That opened a gap of 3.15 percentage points between California‚Äôs bond and 30-year Treasuries, according to Bloomberg data.”


Add to that the fact that S&P downgraded California’s debt rating to AA- from AA…not that I hold S&P in any esteem – I don’t. But the fact is, that CA will now have to pay higher coupon payments on the issuance of new debt thanks to the downgrade. They deserved it.


Latest posts by Michael (see all)

Please note: I reserve the right to delete comments that are offensive or off-topic.