Lack of panic suggests banks know something that we don't
GREEK government bonds have become the dog that didn't bark.
While European politicians make increasingly tough sounding comments about a possible debt restructuring, the bonds hardly budged in secondary market trading.
This has led analysts to wonder if the banks that hold most of the bonds already know something the rest of us don't.
Most market sources say the bonds should have traded down sharply last week.
Comments from senior political leaders including Jean-Claude Juncker and Nicolas Sarkozy about potential "soft restructuring" would normally trigger an immediate reaction by spooking bondholders into selling out at almost any price.
Instead Greek bonds ended last week up slightly and held pretty firm yesterday, when even Greek banks took a pounding in the market.
It has prompted speculation that behind the scenes moves are under way between key bondholders and senior political leaders.
"Every other risky market traded down, so I wonder whether political leaders haven't already started sounding out the banks. They may be getting a sense of their mood and what kind of deal they could manage," one analyst said.
This would certainly explain the lack of panic when "restructuring" was first mentioned by Mr Juncker.
The same analyst believed the core of Greek debt was held by a relatively small group, heavily biased toward French and German banks.
One scenario is that French banks are called into a room with French finance ministers, German bankers with German officials etc.
Instead of restructuring the current debt, banks would be asked to issue new loans, on the same terms, as the existing debt falls due.
In polite, but firm, terms, officials will point out why it makes sense for "everyone" if banks co-operate in a voluntary deal.
That's a big ask for banks with genuine fears of suffering losses, but it's also the classic way that European banks and governments have always done business.
There's even a precedent of this happening. Two years ago the IMF convinced European lenders -- in particular banks based in Austria and Italy -- not to pull out of the battered EU accession economies, even though they were suffering losses.
The move helped stabilise the region and became known as the Vienna Initiative.
If banks holding Greek debt have a sense that something of that nature is afoot, it explains why bond markets are so calm in the face of chaotic comments shooting over the newswires.
What, if anything, can be achieved by kicking for touch is difficult to quantify, but powerful European forces including the European Central Bank (ECB) are strongly opposed to a Greek restructuring.
And the one thing we know here is: what the ECB wants, the ECB gets.