Senin, 26 Maret 2012

Last quote on the new one year bond was March 9th , the foreign law bonds remain unresolved after the second deadline passed and the CDS market for CDS is frozen...

CDS Quotes On New Greek Bonds On Hold; Last CDS and 1-Year Bond Quote on March 9

New Greek bonds are priced at roughly 22 cents on the dollar. Simply put, the market expects yet another credit event. Yet try buying CDS protection on the new Greek bonds. You can't.

The Financial Times reports Greek yields up as CDS trading put on hold
Yields on new Greek bonds have jumped sharply in the past week amid worries over a shutdown of the market in insurance-like products used to hedge the risk of holding Athens’ debt.Banks have stopped offering prices on Greek sovereign credit default swaps because a payout on new instruments could be forced immediately due to technical problems with the documentation used to settle contracts.

Yields, which have an inverse relationship with prices, have leapt more than 3 percentage points to 16.93 per cent on the new 2042 Greek bond – which is issued under a debt exchange with private sector bondholders and used to set the final payout on CDS contracts – since March 12, its first day of trading.

The market’s concern centres on a so-called 60-day look-back clause in standard CDS contracts, which could be used to activate a payout on new contracts in the wake of a “credit event” that was declared on March 9, when Greece secured private sector participation for its debt restructuring.

Bankers fear the rising yields on Greek debt, and uncertainty surrounding the CDS trigger process, could hit sentiment in other eurozone bond markets, where borrowing costs for indebted governments have fallen from recent peaks.

“This is yet another problem that will deter investors and banks from buying Greek bonds,” said a senior CDS trader at one European bank. “If you can’t use CDS to hedge the risk of buying Greek bonds, then you may decide not to buy Greek bonds.”
Greek CDS prices were last quoted on March 9, when a buyer of protection would have had to pay $7.8m up front to insure $10m of debt against default.

Markit, the data provider, said it needed at least three global banks to give it prices for Greek CDS before it could continue to quote them.
Did you catch that? The last quote was $7.8m up front to insure $10m of debt against default. We are talking about a near certain default on the new bonds.

I just did a check on Bloomberg. The last quote on a 1-year Greek bondshows the yield is 1,143%. The date of the quote is March 9th, the last date CDS was quoted.

But hey, Greece is saved. Doesn't everyone know?


EU/IMF officials in Athens to examine more cuts

 Officials from the EU and the IMF have said they expect the government to do more to fight tax evasion.
Representatives of Greece's international creditors were expected in Athens on Monday to examine ways of saving an additional 11 billion euros in a bid to keep the debt-wracked nation in line with the requested fiscal targets.
The measures, designed to take effect in the next couple of years, are expected to focus on spending cuts rather than revenue raising. Reports on Monday said they will most likely affect Greece's welfare programs and public administration.
Officials from the European Union and the International Monetary Fund have said they expect the government to do more to fight tax evasion, which is notoriously rampant in the country. The campaign must generate an additional 3.5 billion euros or more cash-raising measures will have to be introduced.
Representatives of the so-called troika were also on Monday expected to examine a bill for the liberalization of the taxi sector -- which has been the source of rift inside the interim administration -- as well as other reforms that the government has promised to implement before calling elections.
In an interview with Antenna TV on Monday, government spokesman Pantelis Kapsis repeated that parliamentary elections will be held on April 29 or May 6.
Three opinion polls published in recent days showed New Democracy conservatives in the lead. Kapa Research’s survey for To Vima newspaper had the conservatives on 18.1 percent, the MRB poll for Real News on 20.3 percent and MARC’s survey for Ethnos on 17.8 percent. PASOK socialists were second in all the polls but the low levels of support for the two mainstream parties suggests prospects of a clear majority in the election are thin.
New PASOK leader Evangelos Venizelos is said to be open to the idea of a coalition with the conservatives, but sources say he will insist on a non-partisan figure being appointed prime minister if there is not a considerable difference in the votes cast for the two parties. In such an eventuality, it would be likely that current Prime Minister Lucas Papademos would be asked to remain in place.
In an interview with the BBC to be published on Monday, German Chancellor Angela Merkel said that allowing Greece to exit the eurozone because of its debt problems would be “catastrophic.”
"We have taken the decision to be in a currency union. This is not only a monetary decision it is a political one,” Merkel told BBC's Newsnight program.
"It would be catastrophic if we were to say to one of those who have decided to be with us, 'We no longer want you',” she said, adding that the exit of a member country is not foreseen in the EU rulebooks.


Greek bonds overstate restructuring risk, Cavallo says

Bondholders are overestimating the risk that Greece will seek additional debt forgiveness or leave the euro after the country carried out the largest restructuring in history, said Domingo Cavallo, who led Argentina’s efforts in 2001 to avoid what would become a record sovereign default.
This month’s restructuring, which allowed Greece to write off more than 100 billion euros ($131 billion) in debt, provides the country enough relief to allow it to overhaul the economy, said Cavallo, who resigned as economy minister as Argentina defaulted on $95 billion in December 2001. European policy makers may lower the costs of the region’s loans to Greece if needed and will help keep the country in the euro, he said.
Yields on Greek bonds due in February 2023 rose above 20 percent last week for the first time since the government issued them as part of the debt exchange. Yields jumped to 20.1 percent on March 23 from 18.5 percent on March 12 as concerns mounted that the exchange didn’t cut debt levels to sustainable levels. The bonds’ price fell to 24.9 cents from 27.8 cents on March 12, according to data compiled by Bloomberg.
“If I had those bonds, I would keep them and wouldn’t sell them at such a discount,” Cavallo, 65, said in an interview at a Yale University conference in New Haven, Connecticut, this weekend. Today’s prices are “misguided,” he said.
Cavallo, who’s now the chief executive officer of DFC Associates LLC, a consulting firm in Buenos Aires, tamed Argentina’s hyperinflation in the early 1990s by pegging the peso to the dollar, limiting money supply growth and selling state companies. Then-President Fernando de la Rua brought Cavallo back as economy minister in March 2001 in a failed bid to maintain the currency system and avert default as the country’s recession deepened.
Greece received euro-area member states’ approval on March 14 for a second bailout of 130 billion euros ($172 billion) after the country agreed to carry out the debt exchange and implement spending cuts. The restructuring is designed to lower Greece’s debt to the equivalent of 120.5 percent of gross domestic product by 2020 from about 160 percent of GDP.
For Europe, the cost of having Greece exit the 17-nation euro region “is much higher” than keeping it in and “implementing necessary reforms gradually,” Cavallo said. “Greece owes Europe a lot of money. If Greece still has large fiscal deficits for a while, Europe will help.”
Pacific Investment Management Co., which manages the world’s biggest bond fund, sees a “significant risk” Greece will leave the euro, Andrew Balls, London-based head of European portfolio management, wrote on the company’s website on March 19. [Bloomberg]

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