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Did Greek Bond And CDS Traders Just Ring The Bell?
As we hear from one government spokesperson after another that the Greek PSI deal is 'going well' which appears to us to be a misnomer as either its done or its not, we note that the price for the Greek CDS-Bond basis topped Par today for the first time. While there is some noise in this (and extremely wide bid-ask spreads), looking at the ask on the bonds and the bid on the CDS which measures more accurately the price at which basis traders can exit the trade (though liquidity is challenging), it would appear that some hedgies are ringing the bell on this trade and covering at better than Par levels. While we would have expected some basis traders to hold through the event horizon, it makes little sense to look a gift horse in the mouth as the trade has met its 'theoretical' limit (and beyond in fact as the add-ons from EFSF and GDP warrants leave some extra on the table). The point is that the basis (the price of buying a Greek bond and fully hedging its 'default' risk) has peaked, implying a credit event is 100% priced in suggesting CACs are on their way later today (despite current 'news' reports'). If the Greeks really have the needed participation then we would expect to see CDS dump tighter as everyone scrambled out - even to the 45% upf that some think 'new' CDS should trade at, this is not occurring.
Source: Bloomberg and CMA
Today has seen prices for GGBs drop to record lows but at the same time costs for credit protection (bid and ask) have dropped modestly - strongly suggesting the marginal trader was a basis unwind as they sold their bonds and protection back to lock in gains. The 2037 bonds that we have used consistently for CTD are bid at EUR15.17 and offered at EUR25.5 (up from a 'normal EUR2-4 spread) while the CDS is 74.5%/76.5% upfront (anyone still wonder where the liquidity is in European sovereign credit markets?).
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Finally, Total Collapse.
Ok I'll admit it. I'm getting confused. What does this mean in plain English?
Looks like we actually over shot there a little.
It means it's time to move on to the next one. Pick a PIIG...
Jon Corzine?
He's not a PIIG, he's an outright twat.
Sandra Fluke
Think it's down to PIIS now
For the ladies familiarity...men should never PIIS upwind.
Bingo, we move on to the next which will be Portugal. No matter what the German finance minister said to his counterpart in Portugal, they are throwing them under the bus in order to buy time for their big countries.
I'm glad to see I'm not the only one.
Tonight the whole financial system will collapse. Greece defaults, after all. And as predicted by many folks for many months: that will trigger a lot of financial WMD. Or not? If yes, then I'll admit I was wrong with my Boring World. If indeed nothing happens, I can rightfully claim I was right all the time. Make or break this night.
funny how so many people think that we'll actually be told the truth. I think no matter what, we'll have 75% participation and be done with it. Might only really be 40% but it won't matter because they won't show the real data for some vague legal reason. There will be lawsuits and investigations, but things will keep moving on.
no doubt you are correct. you can't watch the news for the real story. My guess is that you will have to read the tea leaves, see who sells what... what ripples in the markets occur later today and in the following days.
Yeah, conspiracy all over the place. Reality is much worse than we are told! Except that it is not. After all, where's Armageddon then?
So let's say you buy a Greek $100 Bond. To protect against the bond defaulting you buy Credit Default Swaps which is Insurance. It will indemnify (make whole) your money in the case of a default. IF you buy a sterling polished Triple A bond from Switzerland the CDS might cost you .35cents. IE- they think there is a 99.65% chance +/- expenses, which is nothing since the money generally goes into reserve and the rest is profit for almost nothing but doing a little paperwork, they wont default.
However, if the bond is a $100 Greek bond and today you want to buy a CDS it will now cost you $100 for that CDS. Yes. That means in a Complete Default (100%) You get $100 of your $200 back- or you could have just not bought the CDS to begin with...net-net. But but but...I lost $100 to Greece and I Paid more than 100% face to buy CDS and I just bought it at $101? Yes, you just paid a dollar to get your money back shortly, when the curtian falls, and the fat lady sings, then dies of heart disease right on stage just to make sure we all know she IS the fat lady, and she will not be singing again...bitchez.
Yeah except that the exact CDS payouts have yet to be determined. CDS used to be tied to individual bond issues which are all different. Plus, the CDS holder swaps his bonds (which are still worth >0 if they pay out at all) for the difference (from the CDS writer) between that and the principal. The CDS settlement auction comes next to determine this. Nowadays (to commoditize the security and make it more liquid) CDS is tied to a particular issuer, not the exact debenture security you may be holding.
So, the win/lose/draw math for each particular holder of Greek bonds and/or CDS is going to be a little different.
I think that's the deal anyway.
Agreed. I was just using absolutes for simplicity. The point you make requires a finishing touch.
After a 30% settlement you will be paid the other 70% from the CDS you paid 100 for except...that 30% may not be net. That may be gross. And remember, even that has to be financed at the new rate. It's not like Greece has $400 Billion just lying around. And their economy is contracting so projections of being able to afford that are slim. And do you get to buy CDS on the new bonds? I highly doubt that would be an equitable deal. You may be luck to net out 15%...and that really only comes from the significant efforts of the ECB to prop them up to do so while they vomit all over Europe.
Oh right, the 30% recovery isn't in cash...its in new bonds which probably won't have a market value = to 30% of your original principal.
Paper ponzi! One meaningless paper for another.
@Tyler/comments
surely this is the point: 66% + participation on Greek bonds gets the CAC trigger, brings participation to 86-89% in Greece so greece then turns to london bond holders and aon a per issue basis says: if you hold out, I wont pay.
Greece reaches its objectives: 95% "participation"/writedown so gets bailout fund.
London bond holders (aka hedgies) get paid out on CDS. So any potential losses have to be covered, so CDS now at par/+par coz having paid say 10c on the $ for a bond that is now 100% likely to be defaulted on and IF not hedged using CDS already, it makes sense to recover at least something by paying +par on CDS as long as its less than 10c (assuming you didnt hedge at all in the first place).
In short, yes CAC/CDS priced in to trigger, but it will be limited, surely, on the holdouts only?
The UK-Law bonds which will be making all the news hussle overnight and tomorrow as reports will claim that they will most likely be paid out at PAR (as opposed to those poor GRE pension funds, stuck with silly Local-Law bonds, getting paid out for less than a 1/4 of par!!) are what should be viewed as being paid out at 100 or not. The CDS however implies the default probability of a certain corp/sov/issue while assessing what premium should be paid for that flavor. The CDS pay out (1-recovery) on the bonds.
This whole above 100 that you see in the chart is the basis PACKAGE, not just the bonds (as any bond over 100 actually implies it is very healthy and in demand) and any CDS over 100 would imply a recovery of 0 which is, for all intents and purposes, impossible in our scenarios here.
The trade of last year, as was advocated here a few times, has been to either purchase foreign-law GGBs and sit on your hands with them, or purchase a basis package. While not for the faint of heart, and certainly no risk officer from a larger bank would allow their traders this gambit, the smaller boutiques and hedgies look to be capitalizing on this trade right now. CDS triggers or not - the market is priced as a definite trigger, otherwise the CDS would re-adjust much lower (my guess is the 50s) to account for the much lower certainty of a payout, minus litigation of course which is a whole different beast.
you mean this is a no lose situ? I'm in! Ok I get I won't make anything but I get to mess up the banks right?
You make a good point about getting in. If you naked shorted the bond way back when for $1 and this closes at a 30% settlement you just made 70x's your money with no real loss risk since you never owned the bond to begin with.
You do realize the basis (hence package) is not just buying the CDS at 75/77 upf but actually owning the bond AND corresponding swap?
It means that the market is pricing in a credit event. Which means the credit default swaps will trigger. The problem is if they do nobody has the money to honor the insurance that the CDSs provide. Somebody or many somebodies will go down in flames.
I thought the risk of Greek default was contagion to PIIS. CDS amounts on Greek debt are a few $billion, no? Is that enough to make a few big insolvent banks like, really really insolvent?
No, thats not the problem.
When Greece does it so will Portugal.
Then Ireland.
Greece will knock out liquidity.
Portugal with expose thier insolvency.
Ireland CDS's will get a fractional settlement and then the jigs up.
Or something like that.
Remember this little ditty: ""Portugal's international lenders arrived in Lisbon on Wednesday to review the country's bailout, with soothing words of support likely to dominate as Europe gropes for success stories to counteract its interminable Greek headache."
http://www.zerohedge.com/news/greece-crashes-and-burns-troika-arrives-portugal-soothing-words
It's the last thing they want.
Well, technically the last thing they want is Ron Paul...but just before that is this.
Yes There is a problem of contagion, which won't be contained .Believe it or not the total outstanding debt that Greece has is about 1.1 trillion. I think the total debt Applicable to the swaps is about 300 billion. The European banks are already levered up 40 and 50 to 1. There is not a lot of room for losses .
Could they handle $3.2 billion in losses? That is the last figure I saw that would be net payable in the event of a default. Maybe they couldn't; I honestly don't know. It just seems like this is not likely to be "the end," but rather a precedent-setting event. The PIIS will demand similar treatment and then banks lose the ability to feign solvency.
I don't know, I'm just drinking beer and watching at this point. This is probably the final nail in the coffin but we have a little bit longer to go before we're buried in my opinion.
I don't think many (any) counter parties will fail to make their payments
"Ok I'll admit it. I'm getting confused. What does this mean in plain English?"
This is the way I see it.
From article - " If the Greeks really have the needed participation then we would expect to see CDS dump tighter as everyone scrambled out - even to the 45% upf that some think 'new' CDS should trade at, this is not occurring."
In other words, the idea is that if a PSI deal is done with enough participation, there would be little or no need to be buying more CDS. They would be dumped at a much higher rate. Thus even though liquidity in this market may be suspect, traders (hedge funds, banks, etc) are keeping their CDS at a higher rate then would be expected if a deal was done (a deal in which the participation rate was real high like 90%+)
Thus we are likely to see the CAC implemented followed by eventual lawsuits. The marginal drop in CDS may have been attributed by profit taking.
You making it too complicated. Look at it like this:
Greece-12MM Default;
CDS 70% Payout- 8.4 MM;
Bond Holder-accept 3.6MM in new bonds at 4 or 5%.
Greece doesnt have the ability to actually pay 400 Billion
Issuers of CDS dont have the 8.4MM OR the much larger naked number~1 Trillion.
Bond Holder has a gun to the CDS issuer- Pay or the CDS market loses confident and collapses. The banks Pay go full retard insolvent.
Actually that might be checkmate. and thats the point.
JPMorganHater gets it.
Today is the ceremonial lighting of the fuse.
Symbolically, it's sorta like a Greek lighting the Olympic torch with others then carrying the torch around Europe this Summer prior to the Games beginning. In today's case, though, the torch heads on to Portugal, Ireland, Italy and Spain, where the bigger incendiary devices, which will blow up the Euro, are already in place just waiting for a non-Greek to be the one to cause the final poof (i.e., ignite the big flame).
JPMorganHater gets it.
Today is the ceremonial lighting of the fuse.
Symbolically, it's sorta like a Greek lighting the Olympic torch with others then carrying the torch around Europe this Summer prior to the Games beginning. In today's case, though, the torch heads on to Portugal, Ireland, Italy and Spain, where the bigger incendiary devices, which will blow up the Euro, are already in place just waiting for a non-Greek to be the one to cause the final poof (i.e., ignite the big flame).
It means the Fed, ECB, IMF, ect all have more money or the ability to print more money out of thin air and keep the can kicking going for a whole lot longer than you and I thought they could. It's all Bullshit! Rally on.
Doesn't total collapse mean a 900 point dow rally in this "new market"?
That might be on the low end of any rally from a total collapse.
I'm thinking we'll see Dow 14,000 in a matter of days, not weeks.
Looks like I picked the wrong week to quit smoking.
And apparently I picked the wrong day to back up the truck on UVXY.
NO . I picked the wrong day..i got vxx option 30% of my portfolio... a month ago.
It stands at .35 with ª week left.
ARmagedon better be tonight or i will be very angry NOT to have been a SHEEP:
Comparing to my worst trade of the decade , i think you have a winner.. just wait ª 1/2 a century.
Good luck.
I sure picked the right one to try that first hit of heroin
Wow, even though I am a Nobel Prize winning Economist, that article is GREEK to me.
Dont' feel bad. Obama won the same prize. You're both in the same bracket: Unaccomplished, opinionated, big mouths.
LOL.
They are lying and inflating the number to trick more investors to participate (if the investors see low participation rate, they might not participate; therefore, the officials have an incentive to lie and exaggerate the participation number)
I have a feeling lying is not going to encourage those holders of CDS who will lose out big time if they are declared invalid.
Headline: IIF Foresees 'Very, Very High' Participation In Greek Debt Swap [Dow Jones]
If you believe that, I've got a "very, very" cheap bridge to sell you.
Duplicate Deleted
Don't see why not,
No CDS trigger no matter what the participation rate is. This market can be ramped another 50% while it's stuck in court.
Why? If the vast majority of CDS holders are banks or shadow banking operatives and they are all holding each-other's (CDS on both the private and sovereign debt in each other's countries) crap and they simply all agree that CDS are worthless, what are the other "investors" going to do?
I don't know about you, but my operation certainly does not have enough lawyers, guns and money.
Pretty sure Kyle Bass nailed this a long time ago.
http://www.youtube.com/watch?v=iXsi_uvxeRI
All that needs to be understood at this stage is even a successful uptake of say 80% means they have to use the CAC clause to sweep up the rest, which is understood to trigger a default on the CDS.
What is important for the basis traders is the process for exchanging the foreign law bonds (around €20bn of the total) is more complex and they need a majority acceptance on each issue, so there may be holdouts who have taken a blocking stake in a particular issue. This is the classic tactic of distressed debt buyers, so would not be a complete surprise if there are certain bonds they have done this on. The result would be court room battles for years and a recovery rate anywhere between zero and 100. However, either way, the debt exchange process for the foreign law bonds is going to be convoluted and this means that the bonds will still exist when the settlement auction is carried out. One of the difficult risks for the basis traders was a successful exchange could have resulted in no eligible instruments remaining, so the CDS contracts would have been essentially worthless.
Maybe it means both sides can declare a victory - on the one hand they can say the restructuring has been a success and they can release the next round of funds and on the other, the banks can claim that the CDS market does function properly.
What makes me laugh is the way they are trying to give the message that things are going smoothly, when in reality it's utter chaos. Also, we are supposed to cheer that a Eurozone member nation is actually about to default...
can you pls comment on my post above?
thx
Credit event.
Up is good, down is bad, up is right, down is wrong.
While the stock market is where the glamour and pretty lights are usually found, the bond and FX markets are much larger and those boys and girls play for keeps.
Ignore the stock market. Pay attention to Bonds and FX.
There you go, plus one for you sir. Now ask yourself, how many of those "big boys" playing in the bond/FX markets are banks or part of the shadow banking system.
Ummmmm.....a lot? :>)
on a full moon into a nasty solar storm and on the date the NYSE was founded.
on the second day of purim.
scatter: You forgot to mention that it's also Mickey Dolenz (of Monkees fame) birthday today.
And only a short week to 3-13-12 when Mars, Pluto, Venus and Jupiter settle into an exact Grand Trine - very rare to be so exact and just chock full of energy.
Could be we will see a Game Changing Event between then and now. High in the sky to the NE - probably have to drive to escape the skylight pollution in the city - a hilltop in the dark countryside is best to view the sky near midnight.
Bring an appropriate wine, perhaps Moet ...
Logic has no place in these markets...
All things are priced in all the time.
Anything can happen and nothing matters.
In other words, would you say it's all pointless?
Yeah that doesn't look good. Now the real question is, who is going under first?
Pump-and-dump...this is what some good 50% of the 14% has been doing the last quarter.
No CDS trigger, ever. Just look at the members of the ISD committe and the CDSs writers.
When are the first one year 1000% yield bond payments due??? Does Greece have the money for those???
>75% particpation rate according to below. Is this simple bluster and propaganda? Who to believe?
FT...16.22: Reuters is reporting that more than 75 per cent of Greek bondholders have signed up to the debt restructuring, citing “a senior Greek government official”. More on this as we get it.
bankingnews.gr tracking this, splitting the participation calculations into the GR ISIN foreign XS and the greek public sector loans, they estimate over 84% participation in greek issues
Here comes cheap Greek Holidays,,,Molotov cocktails inclusive
Have the Athenians given up demonstrating? come on guys heads up
Does anybody else have the feeling like we are getting to the good part in the movie? I used to like the old movies where you had to wait and see the monsters. You only caught a glimps here or there then all of a sudden Bam! there it was. I kind of feel that way now.
Oops, film breakage.
... to be continued after they find the bailing wire and duct tape.
good news is great news because it is good news!!
bad news is good news because it is not worst news!!
but worst news is the best news because we now got central bankers to the rescue!
- Bullish and Winning!!
I love your enthusiasm.
Does it matter which way the decision goes anyway? - can someone help me - where am I going wrong?
If the call is a default - then CDS's are triggered and the issuers are in trouble (especially if they were naked counting on no soveriegn to default again etc.)
If the call is no default - then the CDS market for Sov. debt becomes 'worthless' overnight.
Either way - something will crash surely?
The funny bit being that this is where all people who live life by counting on a 'hedge' will find that their economic schooling is flawed.
Is this an accurate analysis?
....and if the result is 'No default' - then won't we also see the mass dumping of 'sub-prime' sov. debt by pension funds as they realise their 'insurance' is no longer worth the paper it's written on? - thereby collapsing the Sov. debt market too?
I dunno, maybe Superman is on his way and nobody told me...
That's more or less accurate.
Basically if sneaky governments are able to change the rules on what a default is then the utility of a CDS instrument is put into question. Why would you bother using them if you know the rules just get changed so you dont accrue the benefit for which you paid.
If the Default does go through then the CDS industry has worked correctly as it should have all along however the country in question is in deep trouble.
What we have is a test of the markets and of governments. Either way it gets messy and there will be massive social consequences whatever the case.
and still somehow CNBC will manage to declare that this is in someway Bullish for AAPL.
not if CDS trigger on limited issues only.
my understanding, once you are in the participation/signed up even with the effect of CAC then CDS only applies to holdouts
So no crash just burn hedgies for holding out, who will get paid out on CDS so who cares? the foreign bond issue settlement isnt today, its over the next few weeks so hedgies get a second bite of the cherry
I will be a monkey's uncle if they get 75% and push this under a rug now. Yes, when they blast "Greece is saved" on the FRONT PAGE of every newspaper, when NOBODY I personally know gives a shit about Greece, except me, then YES SIR, textbook pump and dump. This is it!
VIX at low of the day. All is well. Just keep buying stocks and using that credit card. All is well.
Does someone have a link to the article where tyler rxplains how they can call the remaining bonds and replace them before the cds auction and subvert the cds process? If banks who sold swaps get out of big payments on a technicality then i suspect interest rates are going way higher in the PIIGS.
That article was difficult to understand and I want to read it again. Forgot to bookmark it.
[Blatantly Ignorant Post: WARNING]
Could the ECB(or some other 'angel') be buying Greek bonds, or CDS, at this point?
The ECB just announced they would not take Greek bonds again for collateral......a last minute save maybe.....couse if the ECB gets the bonds..they can exchange them for better bonds right...???? maybe that is how they are buying off the hold outs...
actually, they do (again) as of today:
http://www.marketwatch.com/story/ecb-to-again-accept-greek-bonds-as-collateral-2012-03-08?link=MW_latest_news
Finished Gasoline Delivered down about 1 million barrals per day from 1 year ago. Economic recovery bitchez
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WGFUPUS2&f=W
American consumption and dollar are less relevant, bitchez.
When you have a printing press it's easy to paint charts.
I'm guessing the CDS will pay out this one last time.
The ONLY reason CDS trades higher is if the deal triggers CDS payments because Greece is defaulting. The CDS has to trigger payments otherwise the idea of using CDS in the future to hedge sovereign debt is over and that would be far more critical for the markets.
and for the banks balance sheets that use that hedge as an asset class
Upvote if you too have absolutely no fucking clue what this post means, but still have complete confidence that ZH has gotten this dead fucking nuts right.
I have no F'n clue what all this means either. I'm more along the lines of Rocky: "Mr. Gazzo says if I don't get 100 from you today, I gotta break your thumb."
long story short it goes like this:
there is a bid/offer on cds like stock measured in basis points, every basis point is 0.0001 if the security is good you will see the CDS spread drops ( the spread is measured against the safest soverign asset in the country) .if the bond is fucking trash then you will see it has a high spread. so when you see CDS spread of 1000 that means 10% above us treasury. they are affected by the credit ratings and a bond that has 100bps 1% is better than a 1000 bps or 10% . you are actually supposed to have an actual bond to hedge it, but since GS sells CDS to customers for
in the first graph if you want to buy a greek bond (the price of a cds already priced in it) you will buy it above par 100 or at premium which means it really really expensive and it's fuckling bullshit compared to a worthless bond.
thats in short gtg sorry if the above does not make sense
Ring the bell Sucka, school's back in...
Good day dear investors.
For now it looks as if participation in the debt write-down might exceed 100%, based on mathematical models derived by the European commision (big up to ma man Barosso) and the Wiz-kids at the ECB.
In light of this I urge you all to invest heavily in goverment bonds from Portugal, Spain, Italy, Ireland, and France, cause it´s as safe as going to the lavatory to do number two.
/Sincerely, your pal Herman
Only if you're not constipated, and they are.
Looks like you were wrong TYLER:
A senior Greek banker has told Kerin Hope, our Athens correspondent, that take-up is “more than 75 per cent and heading for 80 per cent”, after ATEBank came in and state-guaranteed debt held by other banks was also counted in.
Everything in this sage is done at the last minute and it looks like the deal will go ahead just short of full participation, CAC will be initiated, rating agencies will still define as a default and CDS will pay out. But markets wont sell off on any of this as disorderly default not happened.
Rupesh Patel (CSC)
Looks like you were wrong TYLER:
A senior Greek banker has told Kerin Hope, our Athens correspondent, that take-up is “more than 75 per cent and heading for 80 per cent”, after ATEBank came in and state-guaranteed debt held by other banks was also counted in.
Everything in this sage is done at the last minute and it looks like the deal will go ahead just short of full participation, CAC will be initiated, rating agencies will still define as a default and CDS will pay out. But markets wont sell off on any of this as disorderly default not happened.
Rupesh Patel (CSC)
Yea sure its all of course best case scenario and Hopium smoke so thick you cant even see thru it, uh huh.
Looks like Tyler was indeed wrong...again.
With this off the table, we seem to be entering a very nice zone for a strong rally in equities. The attempts to create a self-sustaining economy seem to be coming to fruition.
I would love to have access to the type of hard Hallucinogens that you obviously have access too. I would be curious to know what it feels like to believe, if only for a moment, that the stock market and the economy are representative of each other.
You must live a truly blissful life.
Somehow I am reminded of that fabulous headline (The Onion),"Worlds largest floating metaphor strikes iceberg".
It will be interesting to see how the ISDA describes (spins) this if they intend to allow the banks to renege on CDS payout.
At least we are coming back to a real world where RISK exists. Please no more bailouts,ever.....
Maybe the banks will pay off their CDS expences with the Greek bonds they own......lol
They will anounce success and the sheep will buy "risk on assets" the same fucking thing that happens everytime there is an opportunity for people to do the right thing. Instead we kick the can or lie or both. You choose which this is, but the outcome is the same. The big banks have enough liquidity to ramp the markets to make any deal look good no matter what the eventual disaster it will produce.
who in their right mind will loan Greece any money in the future
At some point, you just have to admit that all this Financial Mesmerization Bullshit is simply a ruse. From the beginning the intent has been destruction of Global Fiat Monetary system and capitulation with end result being nuclear war.
There is no saving or rescue of the Golden Goose of world prosperity and relative peace which these sumbitches choked all life from over the past 10yrs. Can't bring a Dead Duck back to life or reannimate a Cooked Goose.
David Bowie didn't realize it would be an army of Men Who Sold The World (for nothing but out-of-thin-air created faux-money).
Only thing the Fraudsters didn't do was operate anonymously. They need a war and their agent-provocateurs to destroy the repositories of evidence and rosters of employment.
Not An Accident or failure. Planned Destruction.
All who might/could take action have been corrupted. The wonders of fiat from-thin-air money allows no bribe to be too large!
The Greece thing is no different from the Jefferson Cty Alabama Bankruptcy.
Was amazed to see a Federal Judge who went against JPM who claimed the bonds, styled as warrants, disqualified the BR action...
Incredible how the paper-hangers have ruined all there was to ruin and destroyed all means that civilization worked so hard to create to advance growth and peace (organized markets).
Rant off....
They are ready for the fit to hit the shan:
http://www.athensnews.gr/issue/13485/53722
Plain english explanation. Sounds like evil will force its CAC down the throat of the privates. Market will rally a bit, then I will load up on TVIX. Then , Portugal, Ireland, Italy and Spain will need their deals. Oy vey.
http://practicalstockinvesting.com/2012/03/08/collective-action-clauses-greeces-deus-ex-machina/
Anyway, only bad can become of this. The euro banks take a massive haircut and become more insolvent (although we cannot short them so we cannot have any fun) or Greece formally defaults (they already have in a practical sense, but we are told otherwise by the governing CDS body). Anyway, false euphoria and more pain ahead for the markets.
C'mon...dont argue who is wrong or who is right...it is meaningless. I do this for living...the only interest is not to be right or wrong but to make a buck (for myself I must say) ...the rest is for politicians.
finally!?!?!
Do the naked CDS folks (those that don't actually own the bonds) get paid if there's a credit event?
The "naked" (though we dont really call them that anymore) long CDS folk are happy to have seen their px go up on the investment and are waiting for either 1) official credit event agreement from ISDA or 2) private litigation. The short CDS are the unhappy ones from either scenario 1 or 2, though since CDS payments accrue, they received a nice chunk of a premium assuming they wrote these early on. Note CDS payments happen quarterly, or again can be privately arranged to payout at different intervals as specified.
So where's the Greece default?