Monday, March 19, 2012

The Greek CDS auction is a non-event

Well it's done. The "scary" Greek CDS auction is over.
Bloomberg:  Sellers of credit-default swaps on Greece will have to pay as much as $2.5 billion to settle contracts triggered by the nation’s debt restructuring.

The settlement was determined after dealers agreed a final value for Greek bonds of 21.5 percent of face value at an auction, according to administrators Markit Group Ltd. and Creditex Group Inc., and is in line with where the notes have been trading.
Yes, the $2.5 billion number represents the Par less Recovery amount on the $3.2 bn net CDS outstanding. As predicted, it's a non-event, particularly given the number of participants involved. Some corporate defaults have resulted in far larger CDS settlements - and nobody died. The recovery lock sellers got hurt a bit. Locks were traded at 24 a few days back and will now settle against 21.5. But that's the nature of the beast.

Source: The Telegraph
This is not the first sovereign CDS settlement and certainly won't be the last, as we start looking forward to other candidates such as Ukraine, Hungary, etc. And it is quite likely that Greece will be back to "break the chains of debt" (again) for a CDS settlement redux.
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