Greece Fails To Make Another IMF Loan Payment But It Is Tonight's Samurai Bond That Everyone Is Watching

Moments ago, in what was a generally expected development, taking advantage of Grimbo and the IMF's tacit grace period following the June 30 default to Christine Lagarde, and perhaps in an indication of just how serious Greece truly is to honor its creditor committments (not really: it just shows that without additional creditor funds, Greece can never repay its creditors), Reuters reported that Greece will not meet a 450 million euro ($496.7 million) loan repayment to the International Monetary Fund that falls due on Monday given its severe cash crunch, citing two sources close to the issue.

Reuters adds that the missed payment will follow a 1.6 billion euro payment to the IMF which Greece also missed paying last month, making it the first advanced economy to ever be "in arrears" with the fund - the IMF's official euphemism for default. The head of the debt agency, Stelios Papadopoulos declined to comment.

However, it was not today's IMF (non) repayment that traders, if not Eurocrats and economists, are concerned about but tonight's maturity of a JPY 20 billion (about $160 million) Samurai note sold in 1995 and which matures on July 14. The reason why this paltry, in the grand scheme of things, payment is critical is that while continuing to repay the IMF is not an event of default if only purely technically, and for the rating agencies, a non-payment on the Samurai bond would start a cross-default cascade.

As Bloomberg reported in June: "If the Samurai bond isn’t paid, it could cause a cross default on other public bonds,” said Ryosuke Kaneko, a credit analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest bank. If Greece can’t repay the IMF at the end of the month, then “market participants may start focusing on the Samurai bond as a trigger,” he said.

It is unclear whether the cross-default cascade would also impact the ECB's bond holding and for the first time impair the European central bank's Greek SMP holdings.

In the meantime, if the current trading price of the Samurai bonds due in 24 hours (at par) is any indication, the market is clearly not assuming a repayment is the base case...

... unless of course this just happens to be the highest IRR opportunity available in 2015 should Greece, by some miracle, make the payment.