With bondholders set to “voluntarily” accept 50 percent writedowns on Greek debt, the Euro STOXX 50 jumped 5.9 percent while the S&P 500 opened the day up 2 percent. With the writedowns in place, Greece’s debt will be cut to just 120 percent of GDP by 2020.
EU Sets 50% Greek Writedown, $1.4T in Rescue Fund [Bloomberg]
Euro Deal, if Vague, Draws Positive First Reaction [NYT]

Comments from Plugged-In Readers

  1. Posted by Johnny

    great short opportunity

  2. Posted by lol

    extend?… extend?…
    It’s the first of a long series, imho.

  3. Posted by tipster

    All they need to do now is to scrounge hundreds of billions of dollars from someone stupid enough to hand it to them.
    They are thinking “rich foriegners” will save them. Perhaps the Chinese. Apparently, the Chinese are the solution to all problems.

  4. Posted by Rillion

    Of course the Chinese are the solution to all problems, they have all the money now.

  5. Posted by around1905

    Funny that Tipster should mention the Chinese:
    We live in interesting times…

  6. Posted by lol

    I hope that 20 years of purchasing their goods and fueling their geometric growth will buy us a lot of goodwill.

  7. Posted by tc_sf

    The real question is if you accept a voluntary deal will your CDS writer pay out on the credit insurance?

  8. Posted by Brahma (incensed renter)

    The goal of Greece’s debt being cut to just 120 percent of GDP by 2020 is going to be complicated by the fact that there’s just no way the Greek austerity measures are going to remain in place until anywhere near 2020.
    Like Johnny said, great short opportunity.

  9. Posted by steve

    I thought the Chinese were the cause of all our problems.

  10. Posted by Brahma (incensed renter)

    tc_sf, from bloomberg, Greek Accord on Bonds Won’t Trigger Credit-Default Swaps, ISDA Rules Say:

    The European Union’s agreement with banks for a voluntary 50 percent writedown on their Greek bond holdings means $3.7 billion of debt-insurance contracts won’t be triggered, according to the International Swaps ∓ Derivatives Association.

    ISDA will decide if the credit-default swaps should pay out depending on whether it judges losses to be voluntary or compulsory.

    So there you go. Thing is, and this is just my first impression, is that if it’s voluntary, then the number of counterparties who “volunteer” can either make or break the deal and thus avoiding default is by no means certain, which is the point of the entire agreement.

  11. Posted by tc_sf

    I suppose it depends on how much you’re hedged, but if the carrot is you volunteer and suck up a 50% loss yourself, what’s the stick? You take an involuntary haircut and your CDS’s pay out to you?
    It’s unclear if this has been cleverly thought out behind the scenes or if this agreement is just to try and show some amount of progress.

  12. Posted by sfrenegade

    It’s about time we had some movement on the writedowns. It was the obvious solution and a good start. The details will be the important part.

  13. Posted by johnny

    CDS’s wont pay out on sovereign debt (at least European sovereign debt)
    this is just a kick the can down the road.
    the chinese won’t help – they’ll just shake their head and say yes, but do nothing – if Germany doesn’t want to bail em out, why should the chinese?
    Stocks and Bonds and the Euro are sales

  14. Posted by tipster

    what’s the stick? You take an involuntary haircut and your CDS’s pay out to you?
    I think it’s pretty well assumed that the writers of the insurance could easily fail, leaving you with nothing.

  15. Posted by inclinejj

    Yet, the Taverna’s are filled every night..
    Another round of ouzo and Souvlaki’s for all my friends.
    Kick the can down the road, till the can ends up in someone elses yard. They can then deal with it.

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