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 [4] 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.
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Since our initial comment on the 'legal-arbitrage [4]', 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