Following their brief interruption for calculations, the Eurogrouop is back hard at work and a few absolutely meaningless and ridiculous headlines are being spewed:
- *ECB SAID POISED TO RE-ACCEPT GREEK GOVT BONDS AS COLLATERAL (IF AID TRANCHE APPROVED)
- *ECB SAID TO REOPEN ISSUE OF PORTFOLIO PROFITS ON GREEK BONDS
- *ECB SAID TO ALSO LOOK AT OPTIONS OF BOND ROLLOVER, BUYBACK
The market, for reasons we note below, completely ignored this idiocy as anything of relevance as they continue to try to find a way to enable the Greeks to appear to pay their next principal via pure accounting shenanigans as opposed to the transfer of any real money. We wait with baited breath for how they are going to wriggle out of this one and remind readers of the buyback 'boondoggle' Q&A from the weekend [5], as it is the write-down that is what the market is focused on.
First - the ECB has EUR10-15bn of non-PSI debt on its books (held at Par we would imagine) that was bought as part of the original SMP. Buying back this debt from the ECB (at the ECB's cost) would mean no nominal loss for the ECB (and no gain aside from the interest earned) and would reduce Greece's debt load marginally - very marginally.
Second - the acceptance of collateral is a joke! The ELA mechanism currently used to fuind Greek banks is simply a conduit to hide the ECB's direct acceptance of Greek bonds as collateral and does nothing to free up any capital or aid Greece in any way
Third - a bond rollover merely pushes the debt-load out further (obviously) and does nothing to improve debt sustainability
Fourth - using ECB profits for any of this is a non-starter as the amount is tiny in relation to the problem being faced.
And that is why EURUSD did not even uptick 10pips on the news!! The market remains 100% focused on the write-downs or haircuts as any real trigger here.