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Is Greece Really Going To Default?

15 June 2015 by lberuti

The credit market is closing wider after a week-end which did not bring us any closer to a deal between Greece and Europe. Talks were cut short on Sunday, and the tone was defensive from the word “go”. iTraxx Main and iTraxx Crossover were quoted 3.5bps and 12bps wider at the open respectively, at 72bps and 320bps. And it got worse, as the market drifted to 74.5bps and 335bps, but it did not feel panicky and profit taking was quite obvious above 74bps and 330bps. These flows eventually brought the credit market back to its opening levels. It was the same story on options where flows were two-way and one could argue they were actually bullish as investors used the widest levels to buy receivers, ie options that will enable them to sell protection at a later date. Are we really a few weeks away from a Greek default? Credit investors do not appear to think so.