Friday, March 9, 2012

Europe: Baled Out (?)

Upon news that private Greek government bondholders agreed to have their holdings reduced by up to 74% of their face value, it appears the requirements for the second Greek bailout were fulfilled.

Stockmarkets around the world seemed subdued, however:

Dow Jones  +14.08 (+0.11%)
FTSE 100   +27.76 (+0.47%)
Dax        +45.67 (+0.67%)
Cac 40      +9.12 (+0.25%)
(See here)

Have we seen the last of this slow motion train wreck? Maybe.

Business Spectator/AAP:
"The agency that oversees financial derivatives [ISDA] says a massive debt relief deal for Greece constitutes a so-called credit event, meaning it will trigger payouts on bond insurance [CDS].(…)
"That means holders of credit default swaps on Greek bonds will be able to claim insurance payments as a result of Greece's decision to force its debt holders into a bond swap."
(See here)
In the Greek case, these payouts are estimated at US$3.2 bn.

At one hand, this averted Robert Peston's scenario. (See here)

At the other hand, the debts of other European nations, like Italy, Spain, Portugal and Ireland are similarly covered by CDS (altogether, some US$2.7tn in CDS in circulation).  And after Greece, it is not inconceivable that a nation could trigger a credit event. (See here)



Baled Out!

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