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The smart money is getting out of Indian banks. You should follow. One of the big consensus trades among credit hedge funds in Asia is to buy protection in the credit default swap market on Indian banks. State Bank of India’s $750m bond offer met with a “universally poor” reception. Indian households are pulling their deposits out of the banks and buying gold instead as the return they currently receive on their deposits is negative and, given expectations of increasing inflation, the expectation is that the real return will become even more negative. (FT)
Citigroup Inc. (C) said there’s now a 90% chance that Greece will leave the euro in the next 12 to 18 months, with prolonged economic weakness and spillover for the currency bloc. (Bloomberg)
Not so fast! European Central Bank President Mario Draghi: Policy makers will do “whatever is needed” to preserve the euro, suggesting they may intervene in bond markets. Financial markets surged on speculation the ECB will act to lower Spanish borrowing costs. (Bloomberg)
The Draghi Effect: Stoxx 50 +4.1%, Germany +2.7%, France +4.1%, Italy +5.3%, Spain +5.7%, U.K. +1.3%. Dow +1.64% to 12885. S&P +1.65%.
Jim Cramer: “Mario Draghi, the toothless European version of Ben Bernanke, is going all Malcolm X and saying he will preserve the euro and these big sovereign bond markets by any means necessary. And believe me, whatever the Europeans giveth, they can taketh away just as fast.” He added that this reversal of fortune provides the perfect exit point for investors hoping to cash in on some gains. (CNBC)
TGIF! Have a nice weekend!