Goldman: SOVEREIGN RISK IS SPREADING LIKE WILDFIRE

From Goldman’s Francesco Garzarelli, it doesn’t get starker than this…

Sovereign Risk Spreading Like a Wildfire

Pressures on Euro area sovereign bond markets have progressively intensified and spread like a wildfire. Sparking the flames has been in the introduction in early June of ‘substantial’ private sector involvement in the restructuring of Greek debt, crystallizing the notion of default risk in sovereign securities. Pro-cyclical policies, including the introduction of provisional capital buffers related to government bond holdings by banks and higher initial margin requirements on repo at private clearing houses, have all but fanned the flames. Meanwhile, ‘firewalls’ to mitigate contagion across the financially integrated EMU countries are still under construction, as ECB President Draghi has lamented at the end of last week

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via Goldman: SOVEREIGN RISK IS SPREADING LIKE WILDFIRE – Business Insider.

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