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Rumors Start Early: Greek Creditors "Ready To Accept" 3.75% Cash Coupon But With Untenable Conditions
As a reminder, the primary reason why the Greek PSI deal "officially" broke down last week, is because the European Fin Mins balked at the creditor group proposal of a 4%+ cash coupon. So now that creditor talks, which incidentally don't have a soft deadline so they can continue indefinitely, or until the money runs out on March 20, whichever comes first, have resumed we already are getting the first totally unsubstantiated "leaks" that negotiations are on the right path. As various US wires reported overnight, including DJ, BBG and Reuters, citing completely "unbiased" and "unconflicted" local Greek media, "Greece's private creditors are willing to improve their "final offer" of a four percent interest rate on new Greek bonds in order to clinch a deal in time to avert a messy default, Greek media said on Thursday without quoting any sources. With time running short ahead of a major bond redemption in March, private creditors are now considering an average coupon of around 3.75 percent on bonds they will receive in exchange for their existing investments, the newspapers wrote." All is good then: the hedge funds will make the proposal to Europe and Europe will accept, right? Wrong. "Another daily, Kerdos said participation of public sector creditors including the ECB in the swap deal was a pre-condition for that offer, which it said could bring the average interest rate to about 3.8 percent." And that as was reported yesterday is a non-starter. So in other words, the latest levitation in the EURUSD started at about 4am Eastern is nothing but yet another rumor-based attempt to ramp up risk. Only this time the rumor is actually quite senseless, which probably explains why even the market which has been completely irrational lately, has seen the EURUSD drop from overnight highs. That said, expect this rumor to be recirculated at least 5 more times before end of trading.
More on this latest rumormill from Reuters:
Greek bankers and government officials said they had not heard of any new proposal from the creditors' negotiators, after local media reported they were willing to improve their "final offer" of a four percent interest rate on the new bonds to about 3.75 percent.
One Greek daily, Kerdos, said participation of public sector creditors including the ECB in the swap deal was a pre-condition for that offer.
"Until last week, we knew that the steering committee was authorised to concede up to 3.8 percent for the average coupon," one senior Greek banker told Reuters.
"But things are once again up in the air. You have to deal with politicians and 15 different governments asking for different things. We haven't got anything clear from the IIF yet, discussions start today."
Euro zone ministers rejected on Monday the creditors' offer of a 4 percent coupon on new bonds, increasing the chance that Athens would have to enforce losses. Greece and its EU/IMF lenders were holding out for a 3.5 percent interest rate.
The ECB had ruled out taking voluntary losses on its Greek bond holdings but is now debating how it would handle any forced losses and whether to explore legal options to avoid such a hit, central bank sources told Reuters on Wednesday.
One source close to talks among ECB policymakers said that while France, Italy and the ECB board in Frankfurt were against accepting losses, some national central banks, which have expressed reservations over the bond purchases from the start, now accepted that losses may be unavoidable.
"The ECB will not take losses on its Greek bond holdings voluntarily ... but there is a fierce debate within the ECB on how to handle forced losses," the source said.
The best solution might be for ECB to take a haircut on its Greek bonds at the discount they were picked up at by the central bank via its bond-buying programme, one senior European banker not involved in talks said.
"Taking any hit beyond that discount (that the bonds were bought at) would unleash a Pandora's Box. It would raise so many issues about the fiscal integration of European debt, as the losses would have to be shared by the central banks. That would effectively be euro bonds," the banker said.
Finally:
The chairman of BNP Paribas, one of the banks on the committee leading talks for creditors, suggested on Wednesday that bondholders would not retreat from their position easily.
Needless to say, it is one thing for one hold out hedge fund to have done the IRR analysis and say it will sue just for nuisance value. It is something else for a major bank to be on the hold out group.
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Is there a 3X Rumor ETF?...I need some of that bullish action.
haha... good one
Are the banks trying NOT to get a deal?
My guess is: "yes" ... just.need.to.kick.the.can.a.few.more.months....
Yes....at least that's the rumor.
I get the feeling that Greece is getting thrown to the wolves in order to convince any other would be defaulters that they best sign up for Merkel's proposed "fiscal and political" union plan or they will meet the same fate. After all, creating the impetus for an integrated political and fiscal union is the whole reason this crisis was manufactured in the first place.
+1.
Once the "fire wall" is big enough (it is already), the EU will throw Greece to the wolves (Elliott, BNP, Vega, the list is growing). Then, it will be time for operation "pull the plug, cut the Souvlaki."
Maybe it's just me....but didn't the people of Greece throw themselves to the volves?
Do IDSA members have to recuse themselves over a conflict of interest, such as when they hold the bonds in question? No, thought not.
SURPRISE!!
http://uncyclopedia.wikia.com/wiki/File:Surprise_youre_a_retard.jpg
Actually.....it's not that big of a surprise.
How is this news that is important to anyone?
Today show is showing us what we really need to know,
Gabby Giffords kissing people, lady sticking her finger in Obamas face at airport, and most importantly Ann Curry getting a paycheck! How does that happen?
Jamie said its okay for Greece to default, so it will be
Exactly. Who needs facts when lies work so well?
Let Greece go already....
^^^^ YA BASTA! maastricht dyssynergia!
bottom line : this is a lose-lose situation for ECB/Eurozone. If the CDS doesnt work on Greece; nobody will touch sovereign bonds in market afterwords as there is no guarantee of being paid on Italy/Spain bonds down the road; UNLESS ECB and EU go joint ad several, (Eurobonds, fiscal reforms and political integration... a long hard slog for Euroland, a twenty year horizon! Not on, in current pinch hitting play, on the edge of cliff). And, there are a ton load of bonds to be renewed in 2012/2013/2014.
If the CDs does work, even for the non Greek portion, it creates precedent and further down the road Eurobanks are toast, as there is no real growth in Eurozone. Hard rock and whirlpool...hang in there Ulysses.
While they are screwing around with Greece, Portugal is falling off a cliff
Read this, it made me laugh...
Jamie Dimon NAILS It On Europe And The ECB Joe Weisenthal | 2 hours ago
Read more: http://www.businessinsider.com/jamie-dimon-nails-it-on-europe-and-the-ecb-2012-1#ixzz1kZR6a2L5
all in..one for all, all for one...one goes they all go
Everything is so hard to understand now. The EFSF which was to stabilize sovereign bond markets is now to be used to stabilize the ECB which has a pile of Greek bonds it bought via the SMP which was being used to stabilize the sovereign bond market. However with the EFSF now reputed to be used to backstop ECB losses on PIIGS debt it will no longer be available to provide 20% first loss guarantees because now, via the PSI bond holders are being asked to take the first 21,50,75 or 100% loss on these bonds. However, the ESM which was to replace the EFSF in 2013 will now be available to stabilize the 21,50,75 or 100% impaired sovereign bond market in 2012 and will be increased before it even begins to an even larger size so as to create an impregnable 'firewall' of that will guarantee stability in the EU bond markets. Do I have this right?
Ever heard of the Wall of Troy; and more so from recent times, the Maginot Line?
Those HFs are panzers, and the FED has to decide if they be Heil Hitler land or FDR revisited. Its a world between two minds; the US oligarchs. The Euro construct is toast if the Central bank construct of reserve currency land pulls the plug on it; simple as that! The key to collective can kicking, the bank of last resort, stays the FED. All else is pie in tha sky.
For Merkel the choice is simple : you back us with your print press, you give also to IMF your surrogate, and we back the sovereigns PROVIDED they all ante up to a max, not just us. Otherwise it all tanks, and Germany become DM land, and its every man for himself in great deflation times...
Meanwhile, in DC land, all this number crunching, EMS /EFSF thingy in Euroland, is perceived as all fronting this basic power play to save the Empire until it can't be saved any more. By then we will be ...somewhere between 2013-2015. And O'bammy will be in place as Top Dog POtus. Can't see further than that...in DC land.
And yet the Greek Banks Index is up 14% today! and up 43% this month!!!!!!!!
Hope is the ONLY strategy....
Let me try again and simplify things. The ECB via the SMP bought a bunch of government bonds from the banks who need LTRO financing so they can buy more governement bonds to use as collateral for ECB loans because the governments who issue these bonds have no money. To prevent the governments who have no money from defaulting on the bonds they issue the EFSF was created but because the ECB bought so many of the bonds of the governments who have no money from the banks that needed to get loans from the ECB and use the bonds of the governments with no money, the EFSF will now buy the bonds of the governments with no money from the ECB which loaned money to the banks which bought the bonds from the governments with no money. To backstop all these loans and bonds and banks the governments with no money will now fund a super big ESM to replace the EFSF or something like that.
Now tell me, how this can go wrong ?