08:45 – I see that Italy is delighted with the “successful” results of its bond sale. The first headline I read claimed that Italian bond yields had fallen to half what they had been at the most recent previous sale. Well, yes, but only on short-term paper, much of which was probably sold to local investors. The yields on benchmark 10-year bonds, which are what really matter, were still at a disastrous 6.7%. EU authorities were hoping that much of the flood of cheap money made available to EU banks by the ECB would be invested in long-term southern periphery bonds, driving down their yields. That didn’t happen, and no one except the clueless EU leadership expected it to.
13:18 – Someone asked me if I expected significant developments in the Euro crisis imminently. I won’t say that I “expect” it to happen in the next few days. There’s simply too much I don’t know and that, in total, no one person knows. I will say that if I were Greece and knew I would have to default in the near future, this week would be the optimum time for doing so. Financial markets are lightly staffed and a holiday is coming up. The ability of the markets, other governments, banks, bank depositors, and companies to react will be minimal from Friday through Tuesday, which would give me my best chance to implement capital controls, airport and bank shutdowns, and so on with maximal effect and minimal risk of interference. If I were doing it, I’d time it for late Thursday night or early Friday morning local time, or possibly late Friday evening/early Saturday morning.