Greek Government Bonds Jump 12% As Buyback Means Early Christmas For Hedge Funds

Tyler Durden's picture


Greek Government Bonds (GGBs) jumped by over 12% today to over EUR40 - by far the highest post-PSI - as fast money floods the limited size illquid market to front-run the Greek buyback. Every day that goes by means less and less benefit for the Greek people as the discounted price of buying back the debt - with all of the money that Greece doesn't have, goes up. This is a perfect example of greater-fool-theory at work as everyone knows that if this price gets too high, the Greek government (via Troika) will (should) reneg on the buyback which will cause GGB prices to plunge back towards zero. What many misunderstand is that the buyback crystalizes the losses for banks that currently carry this worthless paper on their books at Par and garner the carry (and accruals) and thus in true European fashion, the unintended consequence of this action lines the pockets of fast-money hedge funds along for the short-ride and drains any pretense of capital from the Greek banking system.


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Mon, 12/03/2012 - 10:07 | 3029400 BurningFuld
BurningFuld's picture

I can hear G-Pap's mother now: "Cha-Ching!"

Mon, 12/03/2012 - 10:17 | 3029417 spastic_colon
spastic_colon's picture

o/t must read if you haven't already....explains a lot



Mon, 12/03/2012 - 10:20 | 3029426 MillionDollarBonus_
MillionDollarBonus_'s picture

I’ve been telling people to buy Greek bonds for months now, and snobbish ZHers simply laughed at my investment recommendation with sanctimonious indifference. Now I am finally being vindicated. This investment was a no-brainer. Yields were and are simply ridiculous, given that the Greek situation has largely been resolved and the ECB stands firmly behind bondholders. It takes a common sense value investor to see oportunites like this. Conspiracy theorists are so full of convoluted ideas and projections that they can't see basic realities.

Mon, 12/03/2012 - 10:28 | 3029452 CPL
CPL's picture

Would you hold those bonds to maturity and expect payment?

Mon, 12/03/2012 - 13:30 | 3030039 GCT
GCT's picture

MDB why would this be a good trade?  Greece and the ECB are again going to screw private investors.  I do not invest in soverign bonds but it looks like this would be a stupid trade.  Until the ECB and everyone else takes a write-down nothing will change and these bonds will not make you money.

Mon, 12/03/2012 - 17:31 | 3030829 theprofromdover
theprofromdover's picture

MDB walks through the minefield with his fingers in his ears, and stomps around saying no risk, the minefield's empty.

Until he steps on the mine, he ain't wrong -especially in his mind.

So at this point, he is still correct with no-worries.

Mon, 12/03/2012 - 10:12 | 3029412 Quinvarius
Quinvarius's picture

Betting on anything but massive printing is a bad idea.

Mon, 12/03/2012 - 10:29 | 3029458 CPL
CPL's picture

That's the plan.


Turn millionaires into paupers.  Turn paupers into slaves.

Mon, 12/03/2012 - 10:14 | 3029413 Rainman
Rainman's picture

Fukkin beautiful....just keep whipping this 3-legged GGB jackass to the finish line. 

Mon, 12/03/2012 - 10:15 | 3029415 granolageek
granolageek's picture

But why does this have to be short term. The plan is to cut the Greek debt by 2022, ten years from now.

WTF can't the greek government (or some Troika dummy org) put the bid out there at 35 and be patient. One by one the hedgies will need some cash and take the bid.

What's wrong with this idea?

Mon, 12/03/2012 - 11:50 | 3029690 CrashisOptimistic
CrashisOptimistic's picture

Well, one item wrong with it is that it's a public market.  A hedgie who wants to raise cash doesn't have to sell to the Greeks.  He can sell to another hedgie, at that going price.

Mon, 12/03/2012 - 10:17 | 3029418 SheepDog-One
SheepDog-One's picture

So basically you just go broke, then issue bonds, then have a 'buy back' and then youre rich? Wow alchemy.

Mon, 12/03/2012 - 10:19 | 3029425 LongSoupLine
LongSoupLine's picture

It's blatantly fucking obvious at this point that each end of the fucking global financial spectrum is in on this massive wealth redistribution from the middle class.

If there was ANY fucking real regulation out there anywhere, this would have, at a fucking minimum, raised inquiry beyond ZH.

Fuck the entire spectrum, from regulators to govts, media and the banks, central banks , right down to the parasitic fucking hedge funds.

Choke on your fucking opulent and excessive holiday feasts you fucking global collapsing dogshit eating fucks.

Mon, 12/03/2012 - 10:27 | 3029448 Cassandra Syndrome
Cassandra Syndrome's picture

"But Gravity Always Wins"

Yorke, Thom (1995); Fake Plastic Trees; The Bends, Radiohead

Mon, 12/03/2012 - 10:30 | 3029466 youngman
youngman's picture

I am eating crow...they are going to make money on their bonds....I would never touch them ...but how can you predict what the Central Banks will do...i do not have that kind of information...there is no market...

Mon, 12/03/2012 - 10:49 | 3029510 wEiRdO
wEiRdO's picture

Greek banks do not carry GGBs on par, I think that are valued around 30-35 cents to the euro...

Thus, any buy back program, forces them to surrender any capital gains they may have in the future.

Such a move by the board of directors makes them eligible being accused and prosecuted of "breach of trust"...

Mon, 12/03/2012 - 11:52 | 3029697 CrashisOptimistic
CrashisOptimistic's picture

An error being made in some of these analyses is to say


Greece is buying back (say) 35 billion Euros of debt and retiring it.

That's not correct.  The money they are using to buy those 35 billion (at a price of 10 billion), is borrowed money.  The debt reduction is not 35.  It's 35 - 10 = 25.

Mon, 12/03/2012 - 11:52 | 3029701 homonohumanus
homonohumanus's picture

How about that?


Mostly it says that they want a free exchange zone between EU and US by 2015, the odd are that the monetary union could happen at the same time more or less.


Read that crap years ago from some big US think tank, like in 2007... And nobody in the higher ops saw the crisis coming... right.... It is scary but the conclusion is that it unwinds as expected. As I said elsewhere, we are defeated and by we I mean "the people" and not as "american people only". It is too late, the deal is set, most people are still asleep here in US and in a lot of European countries...

"we, the people, are utterly defeated..."

Mon, 12/03/2012 - 12:19 | 3029806 NaiLib
NaiLib's picture

I would say it's a fair guess that G-Paps Mums account in Switzerland was full of Greek bonds before todays announcement :):)

Mon, 12/03/2012 - 13:47 | 3030086 Nandos
Nandos's picture

A few months ago, when you posted the dumbest deal ever, I told you that you were a litte skewed with greece and greek bond.

Right now, markets are telling you the same... So I think is time to sell greece!!!


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