Skip to comments.Greece Deal Triggers $3B in Default Swaps – 6 mo CDS at 84,199%
Posted on 03/10/2012 7:21:01 AM PST by whitedog57
The long-discussed Greek debt deal with huge haircuts for investors did what was expected: $3 billion in credit default swaps. A committee of credit-default swaps traders will expedite an auction to settle about $3 billion of contracts tied to Greece after the nation took steps to force investors to participate in the biggest sovereign-debt restructuring in history.
The Greek Sovereign 5 year CDS is currently trading at over 25,000.
Here is the CDS spread by date. Notice that the 6 month Greek CDS spread is at 84,199%.
How big is 25,000+? Here is the comparable U.S. Sovereign 5 year CDS:
The spread between Greek and U.S. 5 year sovereign debt CDS is staggering.
Here is a graphical presentation of the spread by time to maturity and CDS rate.
Here is the pricing model for the Greek 5 year at 22 cents on the dollar.
Monday should be an interesting day, particularly for Portugal.
(Excerpt) Read more at confoundedinterest.wordpress.com ...
To be honest, I really don’t understand whats happening, but I get the gist that Greek Bond Holders are getting ripped off by being forced to take a loss of value in thier bond holding or Greece will simply default, well I guess 20% of the whole is better than nothing. But it looks to me like the people of Greece just ripped off several hundreds of billions of dollars to cover thier wellfair state.
What...Greek Bonds took a haircut and all is well again, right?..., except it doesn’t just disappear - somebody, somewhere made up the difference.
Anyone that loaned Greek governments a dollar will be getting 30 cents on the dollar. Even the insurance for bonds (CDS) will take a big haircut.
This is just a phased default. Greece will eventually screw anyone that loaned them money.
Just like we will do to China. Eventually.
How many people who bought Greek bonds thought they were going to be guaranteed by Germany or the USA?
Buyer beware. There’s no such thing as a risk-free investment (unless you’re a crony of a Republicrat politician).
Exactly, Greek banks, Euro banks and investors LOST 70-80 cents on the dollar. Even the CDS will American banks bought and going to be clobbered at the March 19th auction. This guy Sanders was on some business news show saying that CDS investors would get 22 cents on the CDS insurance.
So, our big banks are going to get clobbered on March 19th.
In fact, the author posted the Greek discount on bond chart. About 75% loss on bond investment in the Greek exchange.
It will get worse. If investors get clipped 78% on CDS (insurance), then there will be little or no confidence in lending to much of Europe.
I guess there will be a silver lining in all this after all.
Not quite...they’re NOT being repaid 30% on the dolalr..they’re being forced to ROLL OVER their debt after taking the hair cut..it’s all smoke and mirrors, and will blow up in another year or so..
Sounds like a deal, eh? Thanks whitedog57.
“Anyone that loaned Greek governments a dollar”
Obviously, these “Anyones” are not coupon clippers.
And this is just ignorant, wild speculation, but is it possible the likes of George Soros, could be the losers?
It seems he wins at everything, but at some point caught in his own net?
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