This page has been archived and commenting is disabled.
Greek UK-Law Bond Arbitrage Hits Record
If one chart was worth a thousand words, it is the difference in 'value' between strong and weak covenant bonds in Greece. Since we first brought this 'arbitrage' to the market's attention back in mid January, explaining the subordination impacts of the ECB and the legal implications of bonds issued under various law-regimes, the spread between English-Law (strong) and Greek-Law (weak) bonds has widened dramatically and today reaches a new high. Ignoring accrued interest for simplicity, investors are willing to pay over EUR46 for the strong UK protection relative to less than EUR20 for weak Greek protection for similar maturity bonds. It seems some bondholders are very much set not to partake of the Troika Greek's generous offer.
Since our initial comment on the 'legal-arbitrage', the spread has widened from EUR21 to over EUR26.5 now - quite a considerable profit - as divergence continues to grow as we head into the next few days.
Chart: Bloomberg
»
- 8438 reads
- Printer-friendly version
- Send to friend
- advertisements -
14% of the €206Bn (=28,9Bn) is under foreign-law. Its not much...
Pump-and-dump.
And are held over 50% by hedge funds. Who will fund the €29 billion par when that particular exchange offer is concluded? Oh wait, another bailout to fund UK-law maturities, that's right. And why is it taking place just incidentally in April, as opposed being part of the broader exchange offer: maybe because everyone knows there is 0.00% chance it passes?
Isn’t the word “covenant” kind of oxymoronic here?
Shouldn’t it be something like standard scam, strong swindle or weak fiction?
Lol.
There will be wailing and gnashing of teeth when april rolls around.
So are the CAC hurdles cleared as Bloomberg now suggests, no CDS triggered?
The bondholders are all equal, some are just more equal than others.
The "Goodfellas of Greece" are making their reality t.v. debut!
How much is the value of the CDS on the UK bonds?
WHats bottom line for Greece/ECB?
So if I understand the issue 29 B of bonds get better terms than others? Out of 200+?
All was explained back in January.
I'll have to dig up the files TY
A better question would be, does it matter if all the parties involved agree that the CDS are worthless?
I think TD has answered that one : CDS isn't worthless; they will go to court for it if they have to, aka Argentina.
Um, if you have to go to court, isn't that setting the precedent?
Bet they're betting on the best of both worlds though - CAC forces CDS trigger, they get CDS payoff, write off the debt, then hold on on to the "assets" and start taking Greece to court to get anything on the bonds.
Sort of like our credit collection vultures buying up written-off debt then hounding and harrassing the debtors for pennies on the dollar. Pure profit for them.
What we're watching with Greece is effectively the financial version of a Rube Goldberg machine. I'm just wondering how long it can continue running before all the parts fly off in different directions.
Its a big hoopdie contraption with mechanics (central banksters) all over it trying to keep parts from flying off because as soon as 1 part does fly off the whole hoopdie explodes.
Last one into the debt pool is all wet......and poorer to boot.
What a greeeeeaaaaatttt place to be!
Such a deal!
"Most market participants feel that the impact of a payout of CDS contracts would be limited given the small net exposure of banks that have written these contracts. ... A net $3.2 billion of CDS are outstanding on Greek debt once offsetting contracts have been taken into account, according to the latest Depository Trust & Clearing Corp. figures."
http://bit.ly/weqkqb
$3.2 billion ... not even trillion. What's the problem with Greece? Friday rally. Bye bye crisis.
The next question is can those small banks take the notional hit? With European banks being leveraged 30X I doubt it. This is where the crisis will spread.
I think what you're saying is similar to saying that it's just a teensy little puncture in the balloon. The risk is that even a small default will have unforeseen consequences. Spain and Italy will be adversely affected and once the air starts going out of the balloon, no amount of liquidity injection will be able to keep it inflated.
And its all 40X leveraged again too.
Um, who are the counterparties in those ofsetting contracts?
Whenever I read LWA, I imagine the text being read by Baghdad Bob.
Why pay more for protection when there are no longer guarantees of any types to secure shareholders etc..
Only fake fiat being thrown everywhere by the banks- no person would invest in this crap.
Greece's Swiss franc bonds have to trigger CDS since they do not permit any bond exchange under the terms of the contract.
Is the Can down the road enoughf yet ?
Not even close.
All theyre doing is trying to delay a bit more till this WW3 kicks off. Thats all.
The title of this graph should be "somethings got to give".
What we have here boys is a failure to comunicate!!! When are they gonna wake up? It is time for the revolutiution.
Burn this paper ponzi to the ground.
According to the Guardian blog: -
We flagged up earlier that some Greek bonds (those issued through London) are not scheduled to be restructured until April. Well, Ed Conway of Sky News has developed this point:
Marvellous.
I assume these are the "English Law" Bonds. Anyone know why they are being treated differently? Other than to give another kick of the can.
rule of law is different; squeezing them or folding in to them will be done separately? One day at a time. This is Gologotha march for Greece.
Sadly we probably will wake up friday to see a rally and the exchange a success.
I miss riot cam.
This is how things work in all countries. Whatever used to belong to their people, today it belongs to the multinational companies of the Club. People were betrayed by their given leaderships and they lost everything. Capitals and markets were handed to the Club bosses. If you understand what is going on in Greece, you can understand what is going on in Britain, France, and Germany etc..
http://eamb-ydrohoos.blogspot.com/2012/02/world-war-iii.html
.