Markets SURGE After Headlines About Massive Uptake In Greek Bond Swap


Photo: By Trippography on Flickr is out with a new article that cites calculations of 90 per cent participation in the Greek bond swap deal.That report surfaced just as we reached the deadline for investors to participate in the deal at 3 PM EST.

The Dow jumped nearly 40 points as that report came out, adding to previous headlines that private sector involvement had met or exceeded the 66.67 per cent necessary to go through with the plan. It’s now up about 100 points today, for a gain of +0.78%.

Were the country to receive a full 90 per cent participation in the deal, it might not be inclined to trigger collective action clauses (CACs) that would cause a credit event triggering credit default swaps.

That would disappoint investors who had been hoping that these contracts would reimburse them for part of the more than 70 per cent in losses they would take as part of the deal.

Regardless of this report, however, there have been few experts or officials that believed Greece will truly achieve such a high level of participation.

Either way, the report nonetheless suggests that private sector involvement has indeed been high enough for Greece to receive its second bailout. That will prevent the country from experiencing a disorderly default when €14.4 billion in debt securities mature on March 20.

At this point, consensus is that Greece will receive about 80 per cent participation in the deal and that the government will activate collective action clauses in order to force its remaining creditors to swap their bonds.

We’ll hear official numbers bright and early tomorrow morning at 1 AM EST. According to (via @efiefthimiou) a press conference by Greek Finance Minister Evangelos Venizelos will follow at 6 AM EST.

UPDATE: Skai TV has clarified earlier reports that participation would top 90 per cent, saying that it will reach this number only after the CACs are activated (h/t @L0gg0I). That’s positive for hedge funds and banks that had purchased CDS contracts in order to hedge holdings of Greek bonds because it means much of their cash will be returned to them.

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