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The exchange of Greek bonds has started

12 March 2012 / 19:03:08  GRReporter
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From today, the Bank of Greece begins issuing 20 types of bonds totalling 55.8 billion euro. They will replace 53 older types of securities the holders of which have joined in the PSI procedure on Friday. Furthermore, the head of the of the European Commission Task Force for Greece, Horst Reichenbach, who will present his report on the progress of Greece on Thursday, arrives in Athens today.
    By the end of the week, the euro area finance ministers and the board of the International Monetary Fund must also take the decisions, which will enable Greece to fill the treasury and pay its obligations to the European Central Bank. The maturity of bonds worth 14.4 billion euro is on 20 March. The European Central Bank did not participate in the PSI procedure arguing that it is an institutional rather than a private creditor of Greece. A tranche of almost 40 billion euro is expected in the coming days, which is intended for the recapitalization of Greek banks.
    The bonds exchanged today were issued under the Greek law and the new bonds, which will replace them, are registered under the British law. Requests for inclusion in the PSI by holders of bonds issued under foreign jurisdictions will be accepted until 20 March and their exchange will take place on 11 April. Then the write-off procedure of the Greek debt to private creditors will also be completed.
    The credit default swap auction will take place next Monday, 19 March. As stipulated by the International Swaps and Derivatives Association in the night hours of Friday to Saturday, the Greek PSI is a credit event and the insurances against the Greek default will be paid. The holders of this type of insurance will become clear on 19 March. Depending on the conditions under which they were issued, their holders will receive cash or Greek bonds of the same value. Credit default swaps are bilateral insurance between the customer who buys them and the bank or the insurance company that issued them. The Greek state is a not party in them.
    Currently, the value of this type of insurance against the default of Greece is estimated at around 3.2 billion dollars, a sharp drop compared with the value in 2011 - 5.6 billion dollars. There are two types – the first type is held by creditors, who have purchased Greek securities and want to be insured against a possible default of the state and the second type is the so called “naked” credit default swaps the holder of which does not hold Greek securities, but bets on the default of the country. The majority of them are issued by American and British banks and insurance companies.

Tags: BondsSecuritiesPSICredit default swapsBanksInsurance companiesGreek debtGreek crisis
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