Severe volatility returned to financial markets this month. Central banks had to step in once again to be the lender of last resort, with plentiful liquidity on offer to those borrowers that need it. Worries about the solvency of Greece was the proximate cause for the renewal of uncertainty and sharp reduction in volume. Securities markets have almost shut down once again, with limited primary issuance in the last few weeks. Meantime, the cost of insurance against default risk has soared. This time, however, the reason for the crisis was about the ability of a sovereign to pay its debts rather than a private company.
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