We're All Subordinated (the echo of we're all subprime).

Here it Italy, investors see a 6,0% (circa) yield on a 10 year BTP and think, "Not bad. We won't default because Europe won't permit that and we're all senior in the capital structure, it's a sovereign obligation." Study closely how the default in Greece unfolds and shortly after that, watch how the negotiations for more aid or a debt restructuring in Portugal begin.  The devil will truly be in the details.

The truth is that Greece's debt has been arbitrarily placed into different places in the "capital structure" of that country's sovereign obligations. If you bought Greek debt and you're not a public entity (read BCE), then when Greece restructures (read defaults), you must take your 65% haircut (only 65%?!) while the BCE and other public investors maintain their nominal maturity amount (probably). You've become subordinated even though you own the same contractual obligation.

The BCE and other public investors maintain that they've already done their part and taken their lumps trying to support GGB prices, buying in the open market at 70-80 cents on the Drachma (so to speak). Guess what other bonds the BCE "likes" to buy, Bonos, BTPs and Portugal's debt. So if /when things get ugly and it's time to go to the barber again (read get a haircut) because these sovereigns chose a "voluntary" restructuring then we'll all be subordinated again. Why? Just because. (I guess)

I understand that the "authorities" are trying to save the world, but when legality and contracts will no longer be applicable then we'll find ourselves on a dangerous slippery slope. The authorities will begin to explain to us that in the name of equality / fairness we must limit and sacrifice our rights, our freedom.  Not only will our bonds be subordinated but also, ultimately, our liberty will be subordinated to the whims of the plutocrats and the kleptocrats.

Sorry for the rant.