Greek 10yr yields surge to 11.71% (from 11.35% a week ago) after reports of EUR 4bn deposits having left the Greek banking system in August.

Greek 10yr government bond yield. Source: Bloomberg.com

In the US it is illegal to call for a bank run, so all I am going to say is that if you are worried about the solvency of your bank, and the government that is supposed to bail out that bank is also on the brink of default you probably should think about an action plan.

If Greece leaves the Euro zone, and you (as a Greek citizen) have Euro at home, you might actually make a nice currency gain (if you later exchange it against new Drachma at a much more favorable rate).

Also, PM Papandreou today reshuffled his cabinet (after only 11 months) to avoid a disaster at upcoming local elections in November. The finance minister had to stay (otherwise markets would have gone even crazier).

The Euro was put under pressure after the German Banking Association said the country’s 10 biggest lenders may need another €105bn of additional capital. Commerzbank’s CDS subsequently showed the worst credit deterioration today (+13%). Meanwhile the Irish/German 10yr yield spread reached a new record (374bps, +21bps).

Irish 10yr government bond yield. Source: Bloomberg.com