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Capital Markets

US investors think Greek default is inevitable

Lack of confidence in the ECB’s control over the spiralling eurozone debt crisis pushes leading US investors to prepare for an inevitable Greek default

US debt specialists increasingly believe that defaults in the eurozone are inevitable, with Greece leading the way. "This is the endgame for Greece, ­ there is no other way out," says Xavier Baraton, global CIO fixed income, CIO North America at HSBC.

Other key market investors also reveal that they are preparing for the situation to deteriorate.

“The EU had been hoping that they would be able to come up with a just-large-enough solution to buy enough time for natural healing to occur through fiscal austerity and economic growth, but the markets will not give them that leeway,” says Andy Johnson, chief investment officer for investment grade strategies at Neuberger Berman in Chicago.

“There will be a rolling series of crises with the politicians doing just enough each time. But these crises are coming quicker and faster now – 18 months ago they used to be every six to nine months but now they are coming every quarter,” he warns. “The market simply isn’t buying it any more.”

Greece remains the crux of the problem. In July the EU announced a further €109 billion package for Greece, which incorporated a €135 billion distressed debt exchange.

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