The Hellenic Republic Greek CDS Auction has ended, pricing at 21.5%, just slightly less compared to the Initial Market Midpoint of 21.75 of par. As explained back in January 2009, those who had bought the Cheapest to Deliver Greek bonds trading in the teens coming into the auction, made a quick buck, as these will be taken out at a nice premium to purchase price. For those who bought at par, we can only hope they have arrangements with the ECB to fund the shortfall, especially since only the ECB can "book a profit" by buying up Greek bonds at 80 cents on the euro and seeing these terminate at 21.5. Limit buy orders that were satisfied ranged from 22.75 (where there was just under 70 million in bids by accounts using JPM and DB as dealers), all the way to 21.625, where the breaking bid was courtesy of 120 million in indicated bids, spread evenly between HSBC and Barclays: these satisfied the 291.6 Million in outstanding Open Interest. Overall, there was 3,362.7 million in total limit buy orders across the stack. The laugh of the day once again comes courtesy of an account using JPM, which submitted a total of €135 million in bids between 8 cents and 1 cents (50 million at the former). If they had been hit on that it would have made quite a payday. On the offer side, the dealers showing the biggest Physical settlement requests were HSBC with €332 million, and BNP at €158 million. And the joke of the day once again comes courtesy of RBS, which as usual seems to have one of the most "entertaining" bond trading desks: the reason for the RBS "Adjustment Amount", as speculated earlier, was that the bank's Bid of 22 was above the market midpoint of 21.75: the good news is that unlike before at least they did not confuse price and discount.
Now the question is: what happens to the holdouts, and how soon until we get i) real litigation, not class actions suits filed in German courts, by hedge funds holders of Greek bonds, and, more importantly, ii) litigation or par payout by holders of UK-law bonds.
That said, when calculating fair value of sovereign bonds we now know: 78.5% discount.