The Reporter Is Either Wrong Or This Is A Bad Deal For Greece

Via Peter Tchir of TF Market Advisors,


If the ECB switches 50 billion of old bonds for 50 billion of new bonds, what does Greece get?  No notional reduction. Possibly a reduction in interest payments but that depends on the coupons on the bonds the ECB owns. The new bonds allegedly have some covenants and possibly other projections for the bond holders. That is a negative for Greece - they can default on these old bonds and the ECB can't do much about it.

Maybe the reporter is wrong, but this is a good deal for the ECB, marginal for Greece, but does make it easier to jam holdouts. They can default on old bonds or retroactively CAC old bonds and the ECB won't be affected.

Will Greece agree to this?

If the ECB is counting the difference between purchase price and par as profits - then it is printing money. Maybe that is enough to get the market higher - a clear sign that ECB is printing.

It is possible that all they are considering as "profit" is interest they have been paid and it is possible that the ECB will exchange their bonds based on purchase price, giving Greece some notional reduction.

This announcement is either marginally good or marginally bad depending on the details. It is not great or a game changer - except maybe the money printing angle.

As Credit Suisse noted this morning:

We remain very cautious about the long-term sustainability of the debt after restructuring, and it is just possible (not our core case) that the troika takes the rational decision that it is cheaper to let Greece default and reimburse the ECB for its approx. €30bn of GGB losses than to pay the rising but nominally €130bn. Yet it was only on 14 February (two days before writing) that the ECB was confidently talking of distributing its GGB profits, so we are cautious about second-guessing the analytical framework being used.


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