Would Markets Rally on the 'Grexit'?

Bank of America has a nice twist on a Greek exit, or "Grexit" as everybody now calls it.

The euro would shoot up to $1.40 against the dollar (after first falling to $1.20 in the immediate panic). It is $1.27 now.

Risk assets would enjoy a "powerful short squeeze". Bond yields in Spain, Italy, and the rest of the EMU periphery (and presumably the soft colonies of Eastern Europe too) would come down smartly.

Battered bank stocks would rally. "The Bund curve would likely bear steepen as some of the flight to quality risk premium gets unwound in the back end of the curve" (I couldn't resist quoting this Canary Wharf dialect, but that is how global banks actually talk).

Translation. Investors would come crawling out their safe-haven bunkers, blinking but happy to be alive, and suddenly wondering what the fuss was about.

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