Rumors That ECB Will Transfer Greek Bonds To EFSF

Tyler Durden's picture

via Peter Tchir of TF Market Advisors,


It has been rumored before, but allegedly the potential for the ECB to transfer bonds to EFSF is back on the table.

The ECB would transfer the bonds at cost to the EFSF (net of interest earned?) and the EFSF would participate in the PSI.


There are some positives in this.  Greece would get additional savings.  With holdings of over €50 billion, a 50% principal write down would be helpful to the overall situation.  It would also make it more clear that the bonds held by the ECB aren’t effectively subordinating other debtholders.  Those are positives.

There are also some definitive negatives.   Let’s say they transfer bonds at a price of 80% of par.  Then the EFSF would lose about 50% of par immediately (assuming a post restructuring price of 60% for the new bonds).  That would be a loss of over €25 billion.  It is just taking money from the EFSF.  That is bad on a couple of fronts.  The obvious thing is that the ability to leverage EFSF at all (and yes, some politicians continue to talk about that) is basically gone.  If the Troika will just use the EFSF as a way to bury losses they don’t want to take directly, no one will lend to EFSF on a leveraged basis.  Since most people doubt EFSF would be leveraged, it doesn’t have a huge impact, but is important.


The other negatives are slightly more subtle, though they could come out loud and clear.  The ECB could have taken the loss directly and just printed money for that loss.  So this demonstrates an unwillingness to print money.  The ECB could take the loss and get capital from the member states.  By using the EFSF rather than new capital calls, it is a sign that countries are at the limit of what they will contribute.  Hoping for new money is unrealistic – since this was the perfect opportunity to put up new money and tell the world that Europe is truly united and willing to contribute.  This just uses up money that was already allocated.

It will get very interesting if some countries actually come out against this.  If the EFSF was going to use guarantees to issue debt and then buy bonds of the PIIGS, that was one thing.  Now they are going to borrow money so they can hand it to the ECB.  That is different and may annoy some of the more prudent countries.  They may remain silent, but this can be a source of disagreement, and frankly, should be. 

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Manthong's picture

Why not?

Their balance sheet is a fiction, anyway.

AldousHuxley's picture

isn't that the whole point of EFSF?


TARP of Europeons. Slush fund to save bank's bad bets to socialize the losses on the working peons.


Europeons are going to find out what "socialism" is all about....paying for someone else's party bills.

Irish66's picture

Last hope..tick tock

CrashisOptimistic's picture

No. No. and No.

What this means is the following:

1) Such a rumor being floated means they DO NOT HAVE A PSI DEAL in place, and they are having to bribe the Greek Parliament parties to get them to vote yes.  This is a bribe.

2) Where does the EFSF get the money to buy these clearly worthless bonds?  If Germany owns a portion of the EFSF, this haircuts Germany, which they have already objected to re ECB purchases of Greek bonds.  It's why they won't let the ECB print.  It guts Germany's share.  They will object.


CvlDobd's picture

Jesus Fucking Christ!

What a shell game. Crash you are right I believe. There is no fucking deal on these shit bonds.

This is so stupid. Just when I thought my apathy couldn't rise any more.

spartan speculation's picture

Crash is right. also The bankers can not let the CDS be triggered that is why we keep getting greece's deadline pushed back what is it now like 3 Fxxxxing weeks this Bs has been going on.  every day and every weekend we get headlines greece is wrapping up its debt deals.  You got papademos the banker appointed to make sure that the bankers interests are served. papandreou the fXXXing coward who sold his country and people out hoping that they dont notice so he can get back in again. the whole thing makes you sick 

disabledvet's picture

Sounds like a pickle. Think I'll ride my motor-cickle.

slaughterer's picture

Is Greece so important to the EU?  Answer: No.  Pull the plug, cut the souvlaki.  

spartan speculation's picture

slaughterer you do realize that banks around the world are all bankrupt they stay in business because the central bankers ponzi scheme is just to print and add debt to keep the game going. If greece says to hell you we're lrsving the euro and defaulting on our debt. the CDS contracts will trigger and then its the dominoe effect on banks. lehman brothers was just the warm up if this happens. but the bankers wont thats why all this bs daily. 

Lord Welligton's picture

Can they take the Socialised Irish Bank debt also?

Say €60bn.




Mongo's picture

That is different and may annoy some of the more prudent countries.

Tyler, there is only one prudent country in the Eurozone... and it is about to go bust too

urbanelf's picture

Why don't they use the bonds to make a giant cake and then have a party?

ghostfaceinvestah's picture

Wow, the German taxpayers are going to fucking love this - the ink isn't even dry on the EFSF documents (the EFSF that the German's are basically guaranteeing) and they are going to take losses.  I'd bet a lot of Germans actually thought they would eventually get that EFSF money back, a la TARP.  This would end any such illusions.

CrashisOptimistic's picture

Absolutely.  And guess what S&P and Moody's do to the EFSF bond ratings?  They'll never EVER sell any to the public.

In general, Germany has to just put a stop to all this bullshit.  Every convolution and maneuver is, at its end, nothing more than taking German money and giving it away.

A last thing is this . . . who says Greek default and leaving the Euro are connected?  Suppose Greece defaults reluctantly with no declaration but no bond payments in March, but resists any suggestion that they leave?

There is no mechanism in the treaty to leave either voluntarily or involuntarily.

youngman's picture

I am watching as the end is near..and all the players are just scrambling for short term one is thinking 5 years out...its down to two weeks out now...and how I can get as much cash as I can before it crashes...that is true with countries..with the politicians...with the bankers...with the investors....its steal it now...and the one with the most when it crashes one will account for this money ...

CrashisOptimistic's picture

You are correct.

You can bet your bottom dollar that the Greek report given to the political party leaders did a comparison of what happens to Greece the rest of 2012 if it defaults, vs takes more debt to string things along.

There will be nothing in that report laying out the situation 2-3 years from now.  

Atomizer's picture

Just another day of shuffling the deck chairs on the titanic.

LongSoupLine's picture



Shadow Banking at its worst.  What an f'ing fullretard shell game this is.

falak pema's picture

The EFSf will soon be delcared the KNOSSOS MAZE.  You will only enter at your own peril to look for the lost bonds of Greek sovereigns now defended by the Minotaur who will never let you leave the maze alive! You have been warned HF shills! 

Only the guy from the ECB has the key to it, the Ariadne thread! You have to speak pure German to understand that. Achtung!


ZeroPower's picture

Considering the ECB funds the EFSF (who are we kidding right) then it doesn't matter who takes the hit as it all comes back to the same parent; SPV or otherwise.

fonzannoon's picture

If they do this won't Portugal, Spain, Ireland, Italy, Japan, The USA, The Maldives etc. want the same deal? Is that not the unsolvable problem? I say hold off on the Maldives until they eventually sink into the sea.

1929agin's picture

Friday, 2/10/12 "Fireworks" ... not the 4th of july? new independence for greece,and other piiigs...rumor?

slewie the pi-rat's picture

 <<<+++  let's get a clown car of finiMinis over here, stat!

 <<<===  call a summit!

[sorry, BiCheZ, fiscal reatraint was ruled out so the pols could get elected so they could FIX this! they promised...!]

slewie the pi-rat's picture

those finiMinis are quite the show, aren't they?

Olympia's picture


...the barbarians, who forced beautiful Europe to get down Zeus’“back” and made her a prostitute ...the unworthy Europeans, who in 1945 “took Europe down” from “Mount Olympus” and in 2012 relinquished “enslaved” Europe to the Phoenician loan sharks.

Germans are proved to be the easy solution to breach Europe’s door. Whoever wishes to “set foot” on Europe and demolish it, the only thing he has to do is to “fool” the Germans. For a second time in less than fifty years, Europe’s idiots become the victims of foreigners and they serve their interests at the expense of Europe...



The German traitors of Europe along with the Phoenicians from Asia may have forced Europe to get down from the "back” of the Greek “bull”, but it remains to be seen how they shall pull it through with the “bull”.



GideonGono's picture

Can someone explain why exactly the ECB can't participate in the PSI? Why can't it take a haircut? Granted they would then be insolvent but who is going to put them in bankruptcy? Can't they just earn their way out of their capital hole thru interest income?

EyeQ's picture

I believe if they agree to a haircut that triggers the CDS and that is what they are desperately trying to avoid.  Only private holders can take a "voluntary" haircut and this means the CDS is not triggered.

Excursionist's picture

The ECB is precluded from financing nations' budgets, and a haircut would constitute a transfer from the ECB to a country.  "What about the ECB's participation in sovereign bond auctions?" you say.  The semi-plausible excuse has been that it is within the Bank's purview to support debt markets for means of conveying monetary policy.

If such jujitsu in spin is too much, no worries.  Pop a Xanax, and move on.  Nothing to see here.

Caviar Emptor's picture

Rumor the newly re-structured Lehman Brothers emerges from bankruptcy and buys Greek bonds at par

SmoothCoolSmoke's picture

Rumor BS never ends.  Long Euro, long Dow.  Ridiculous.

allenaki's picture

Greek Opposition Leader, Mr. A. Samaras has just rejected the creation of the so called "ESCROW FUND" been proposed by Troika, because "it 's pulling Greece under the direct German Inspection"

Is this the first step to sudden elections?

Nobody For President's picture

More like rejection #2 of Germany's wish to control the spigot of bailout funds. Frau Merkel's first try was a EU Commissioner to have control of the disbursement of funds to the Greek government. Greek Parlimentary pride was injured - so the Escrow account was the second try. For some reason, the Greek politicians want to be treated like adults: they are willing to promise all kinds of austerity stuff, now give us the money. Germany, and probably Austria, Finland, and the Netherlands - maybe others - look at what happened to the last bailout money and want a bit more control, rather than handing over lump sums.

They specifically want 80% of the money to go straight back to the lenders to pay interest on past loans - can't let the banksters down. Greece Parliment wants to preserve at least the semblalance of adulthood control over spending. They probably want more than 20% of the bailout funds to benefit Greece a bit more directly aswell.

Start with a bad assumption - that the Greece debt hole has a bailout solution, and all kind of weird-ass stuff follows. Maybe, hopefully, this will be the last straw deal, and Greece can bail/will be released to default - but I doubt it. There is sheer desperation in this stuff the past week - any damn thing to avoid a credit event and CDS payouts...

About 45 minutes ago, Bloomberg came out with "Emerging Markets Stocks Rise as Greece Meetings May Signal Deal Progress"

I mean - Jezzus H Keecrist - enough already. Just mercy kill this gut shot deer (formerly the deer in the headlights) instead of letting it flop around and bleed to death.


New American Revolution's picture

And it's all coming to Amerika.   See

Olympia's picture

Global Debt Crisis

The greatest private fraud of human history.
Who are the great fraudsters who are becoming the murderers of the human kind? How does the economy "illness" threaten Democracy and the freedom of people?
By knowing what happened in indebted Greece, where loan sharks created “bubbles” and the current inhuman debt, one can understand the inhuman plan in total ...understand where this plan started just to bring all states at the same end ...understand how this type of plans are established...


RobotTrader's picture

It really doesn't matter what the ECB or EFSF does.


Nobody gives a rat's ass about Europe, Greece, LTRO's, etc.

The Sheeple are too busy wolfing down Buffalo Wild Wings and watching sports all day.

BWLD exploding up by $10 after hours after reporting blowout earnings.

This chart is totally insane:

In fact many of my peers who have been continually investing in their 401(k)'s despite my early screechings in 2001 - 2002 "Get out of stocks!  Everything is going to crash", have done very well in stocks by dollar cost averaging year in, year out.

And those guys couldn't tell the difference between a CDO Swap and a iHOP pancake.

Good thing that since 2004, I have kept my mouth shut, careful not to give any advice to my Sheeple friends.

And good thing I finally learned my lesson not to fight the Alpha-Dog PigMen and TPTB by being a "short only" hero.

Mr Lennon Hendrix's picture

Arthur Anderson thanks you and your freinds for your ignorance.

1929agin's picture

It really doesn't matter at all, HFT will move markets in time, slow accumulation in positions,  yields/credit market break in time, sit back, and enjoy the scenery.

Another round, please.


vote_libertarian_party's picture

Bloomberg has a paragraph that says this is only for $14B.  So a tiny portion of the problem.


But I'm sure stocks will rally hard anyways. 


No real sollutions....just more can kicking

Nobody For President's picture

OK, this is easy. Watch closely now - I have these three walnut shells here in front of me. I'm going to put this pea under the middle shell. Watch closely now...



Yamaha's picture

One of these days we are going to wake up and find this market gapping down 500 points with no algo floors........!

youngman's picture

Can someone tell me why the Euro is "strong" today....with all that is going on...i would think it would be at historic .80 to the dollar if not lower...strange

SillySalesmanQuestion's picture

Just default bitchez and get it over with.

Mr Lennon Hendrix's picture

Who is selling this junk to their clients?  Ok, I know who is, but how are they?!  These investments are shit.

tony bonn's picture

this is another shell game - musical chairs.....last one standing gets to stand in a bucket of shit...

chump666's picture

This is the deal. The ECB has gone rogue, almost completely now subsidized by USD swaps via the FED. Their backward and bizarre idea is the last of the Euro-mess AAA sovereigns will underwrite sovereign junk via that obscene fund that Germany is backstopping.

I think that the ECB will implode unless they print. They print, Germany get a Weimar part 2 as does Europe. So those crazies will sit pat, for the time being, in the meantime they are buying PIIGS debt and the EUR. The EUR meltup that occured within mins last session was all ECB intervention via EZ banks. Equities (US) were selling on the close and Asia looks wobbly, the EUR goes bid? As for Greece, either they default now, or someone is going to get killed...literally. It's getting out of hand. Once Europe thaws out, Spain and Italy will erupt.

Clueless f*cking academic a-holes are sending us into a sh*tstorm.

non_anon's picture

and the EFSF to the US taxpayer