Greece Private Bondholders to Reduce Claims by 50%

The FT reports,

European leaders reached a deal with Greek debtholders on Thursday morning that would see private investors take a 50 per cent cut in the face value of their bonds, a deep haircut that officials believe will reduce Greek debt levels to 120 per cent of gross domestic product by the end of the decade.

The agreement, made just before 4am after nearly 11 hours of talks at a summit of eurozone leaders, includes a new €130bn bail-out of Greece by the European Union and the International Monetary Fund.

We applaud the deal and don’t think the EU had much of a choice.   But there are risks, the most important, of which, is contagion to other highly indebted eurozone countries.  The new bond options should trade well below 5o percent of current face value as they do now and we really cannot determined the values until more details are released.

The global equity and risk markets seem to like it, or at least pleased with the announcement,  and have bolted like Kentucky Derby thoroughbreds from the starting gate.  Now let’s see how far they can run before being spooked by the potential fallout.   Stay tuned.

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This entry was posted in Black Swan Watch, Economics, Equities, Euro and tagged , . Bookmark the permalink.

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