Greece gets bailout

Greece finally got its bailout on Tuesday. Bloomberg reports:

Greece reached an agreement with its private creditors to secure the biggest sovereign restructuring in history, paving the way for a second bailout of the debt- ridden nation and averting an economic collapse.

Investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility, the International Institute of Finance said in a statement today after a final round of talks overnight. The coupon on the new bonds was set at 2 percent until February 2015, 3 percent for the next five years and 4.3 percent until 2042.

While there remains some doubt as to whether Greece can avoid default in coming years despite the restructuring, investors appear to be confident that there is little risk of contagion for the time being. Italian and Spanish bonds rose on Tuesday and both Spain and the European Financial Stability Facility successfully sold bills.

Meanwhile, consumer confidence in the euro area has also improved. The European Commission reported on Tuesday that its index of household sentiment in the euro area rose to minus 20.2 in February from minus 20.7 in January.

The US economy has performed better than the euro area recently and the trend appears to remain intact. While the Chicago Fed National Activity Index decreased to 0.22 in January from 0.54 in December, the three-month moving average increased to 0.14 in January, its highest level since March 2011, from 0.06 in December.