We have written about the Perfected Trading of Goldman, JPM and other banks. Today we posted Peter Brandt’s excellente piece on dealing with less perfect trading. We now turn to the European style of trading, you simply “ride out” the positions you have on, simply because there isn’t one single bid in the market. Protection is too expensive, nobody wants the crap you have, so you simply do the famous “Ostrich” strategy. We wonder if ECB even is aware of this fact, there is NOT a single bid for Greek paper. From Reuters;
European banks remain saddled with almost 100 billion euros of Greek government debt they can’t sell, hedge or ignore, after a number of recent deals to offload the exposure to reduce the impact of a possible default ended in failure, according to bankers involved.
The deals have been thwarted by a lack of willing buyers for the debt — even at record low prices — and that exposed lenders have been unable to buy protection because of the high costs, with top bankers advising their clients all they can now do is cross their fingers and hope for the best.
“The vast majority of these banks have just been unable to do anything,” said one European banker who has advised dozens of such banks. “Protection is too expensive, and markets for these bonds are illiquid, so many are riding out the problem. Right now, all they can do is shut their eyes and hope.”