Money markets: referendum fears threaten bank financing window

The brief financing opportunity that banks have enjoyed in recent weeks is set to end abruptly after the Greek prime minister's call for a referendum on the country's bailout deal raised fears of its uncontrolled default.
After a three-month lull, October produced a handful of senior unsecured bond deals from issuers such as Deutsche Bank, ABN Amro and BBVA, taking advantage of improved sentiment after the European Central Bank extended its support measures to financial institutions and politicians promised a comprehensive solution to the eurozone debt crisis.
But Greek Prime Minister George Papandreou's shock decision on Monday to hold a referendum thrust fears over the future of the eurozone back to the surface. If Greek voters reject the unpopular bailout plan it could result in a hard default which could force banks to take even deeper losses on their Greek sovereign bonds than the 50 percent agreed last week.
"The financing window has slammed shut just as it was beginning to open," said Societe Generale credit strategist Suki Mann. "And if the Greek uncertainty continues, then it will stay closed for the rest of the year." Shares of French banks and other lenders exposed to Greece and other weak eurozone countries slumped, while the Markit iTraxx Senior Financial credit default swap index widened around 30 basis points to over 250 basis points.
The subordinated equivalent was over 50 basis points wider and an 18-month senior bond issued by Spanish bank BBVA on Friday was quoted 30 basis points wider since launch, with the deterioration in sentiment likely to keep both borrowers and lenders out of the market.