Greece Gets Bailout Deal. Now What?

February 21, 2012 12:10 AM

What Traders are Talking About:

* Greek deal finalized. After a long meeting, European leaders agreed to terms of a second bailout deal for Greece this morning. Greece will receive 130 billion euros ($172 billion) in bailout funding in exchange for stricter austerity measures. In addition, the deal will cut Greece's debt to 120.5% of GDP by 2020. The private sector will take a 53.5% "haircut" on Greek debt instead of the 50% writedown that was originally agreed to in October. The European Central Bank will not take a haircut, but will pass along profits from Greek debt.

The long and short of it: With the threat of Greece defaulting now pushed down the road, attention will turn to Italy, Spain, Portugal and Ireland.

* China quietly eases monetary policy. With so much focus on what would happen with Greece, China quietly announced over the weekend it was cutting bank reserve requirements by 50 basis points as of Feb. 24. The move will free up liquidity and is seen as an attempt by the People's Bank of China to jump start its slowing economy. While the timing of the move was unknown, it was widely expected China would continue to ease monetary policy in a pro-growth stance.

The long and short of it: Easing monetary policy is potentially friendly for commodities -- if China can keeps its economy from slowing too much.

* Chinese soybean purchase agreements finalized. A delegation of Chinese officials completed its signings of purchase agreements for U.S. soybeans late last Friday in Los Angeles, inking deals for another 4.8 MMT. In total, Chinese officials signed purchase agreements for 13.4 MMT of U.S. soybeans last week, which was record tonnage and more than anticipated. The Chinese purchase agreements are valued at around $6.7 billion.

The long and short of it: While the purchase agreements were higher than expected, there's very little lasting market impact, as they are goodwill agreements and represent only a fraction of what China will end up buying.


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