Wednesday, 7 March 2012

The Greeks, The Bonds and The Hedgies

8:30pm and in the Wild West of Sovereign Bonds Haralambos the Greek awaits to see whether his PSI take up is above 66%.  Gomez Sachs and his possee are twitching, Harry only needs 66% of them to switch sides.

He looks confident, the stark warning he issued to Gomez and his crew has already forced a few of them to switch sides. 40% he thinks, but because Harry forgot his contact lenses, he can't give a precise estimate.

The watching crowd are undecided....

Only yesterday the crowd thought that Gomez Sachs and his possee would back down (hence the crowd trading at 25c on the Eur, or a reduction of 75% after PSI acceptance), but a glimmer of hope has spread among them.

If Gomez and his crew can hold out until March the 24th, Gomez would win one of the best duels he has ever come across. They give up and Harry the Greek throws us worthless bonds and the possee lose 8c on the dollar, we remain strong and we make 66c on the dollar!

Moving away from my Western themed arguement, what are the possibilities by 9pm??

1. Well, PSI take up could exceed 66% and CaC's are enforced on the stragglers. One would have thought CDS would then be activated and volatility aside, Greece will lower it's burden.

2. Maybe PSI would exceed 95%! No questions asked, Greece lowers its burden.

3. It hasn't got 66%, it will cheekily extend the deadline and maybe throw a few sweeteners in.

4. The hedgies hold out and leave the PSI voting panel after March the 24th, with 100c on the Euro courtesy of the ECB.

5. The hedgies hold out and declare a default, panic ensues....Who's next ??

What do you think partner? Are those 33c bonds looking to good to pass up, or did you buy them yesterday for 25c and taken on what is essentially a free option.


  1. RE option 1, it's pretty much selective default but for what ever reason it's unlikely to be classed as a credit event that would trigger CDS, ISDA gaming the system yet again. Greece is a failed state and cheats charter, getting involved anything Greek violates the cardinal rule: "Never stick your dick in crazy".

  2. Why would you not think it would trigger a CDS?

    1. ISDA stated somewhere that "Credit Event Has Not Occurred with Respect to Recent Questions on The Hellenic Republic Restructuring" As I read the statement even the collective action clause wouldn't be classed as a credit even.

  3. ISDA decided that at this current time there was no credit event, stating "The EMEA DC noted, however, that the situation in the Hellenic Republic is still evolving and today’s EMEA DC decisions do not affect the right or ability of market participants to submit further questions to the EMEA DC relating to the Hellenic Republic nor is it an expression of the EMEA DC’s view as to whether a Credit Event could occur at a later date, in each case, as further facts come to light."

    If a CaC was activated this would constitute a credit agreement. The question that was asked was if a credit event had occurred in present time, rather than will a credit event occur at some point in the future.

    However I did look at the amusing fact that only writers of CDS take part in the voting in my blog post