Greek Banks Recapitalised
A US holiday made for quiet trading conditions overnight, but earlier risk finally found some consolation during the European session after some favourable news flow. This boost to sentiment ultimately faltered however as investor concern over the currency union, and especially its banking sector, returned. Newswires reported that Greek banks had obtained the promised EUR 18 bn in fresh recapitalization funds and that Greece still has access to a residual cash reserve to help make ends meet in the near future. Overall however, the troika still seems far from moving towards a comprehensive solution with only a month to go before the end-June Eurozone leaders’ summit. The capital injection does allow the banks in question to return to traditional ECB funding channels at least, though ongoing liquidity provision via the ELAs remains one key point of contention, especially for the Bundesbank. Meanwhile, Spain said it was mulling using debt to recapitalize banks rather than directly with cash. This mimics an arrangement already used by Ireland to recapitalize its banking system. Our flow monitors suggest that asset managers, though still on the offer, have slowed down their pace of selling in euros but this would all prove academic if there were material developments which would point to a Greek euro exit. Overnight EURUSD traded 1.2525-1.2625 and USDJPY 79.34-79.52.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank