The Midnight Sun - Pt 2 - Are You Set?

Moving West from Part 1... That's the signpost up ahead: The Greeks are running on empty and could default by next week. And Greece faces a hump of bond redemptions to the ECB in July and August that it cannot meet without a fresh injection of funds. LA County has a larger GDP than Greece, so who cares if the Spartans default and exit the Euro? Right? This could lead to a Grexit from the EU and further Euro downside, but more importantly, and in any event, could start a series of debt defaults and increase credit spread margins.

That's the signpost up ahead: $7tr of fixed income securities currently have a negative market interest rate, and for the first time ever, the Euribor dropped below zero. Meaning EU banks are getting paid, not to lend money, but to borrow it. Further borrowing of those money-like assets could further exacerbate any dearth of "moneyness."

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