Friday, March 9, 2012

It's The Economy Stupid: It's Greece's fault (or default)

Greece technically defaulted on its bonds yesterday. Bondholders tendered 152 billion euros ($201 billion) or 85.8 percent, of bonds governed by Greek law after the government made its bond swap offer.  In order to avoid a default 95% of the bondholders had to voluntarily participate.  However, the 85% exceeded the amount (66.6%) needed to invoke the collective action clause to force all investors to take part in the sovereign restructuring.  This should trigger $3 billion of insurance payouts under rules governing credit-default swap contracts.  The International Swaps & Derivatives Association’s determinations committee meets at 1 p.m. in London today to decide whether the use of CACs is a restructuring credit event which will cause a payout of swaps insuring Greek debt.


So now everyone’s attention will turn to the counterparty’s of those credit-default swap contracts to see if they can pay or if they will default in a daisy chain of events.



John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721



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