New bonds issued see yields soar

The new Greek bonds offered high yields from their very first day of issue on Monday, indicating that the markets have not ruled out a disorderly default for Greece.

The Public Debt Management Agency (PDMA) went ahead on Monday with the swap of the old Greek law bonds, with a nominal value of 177.25 billion euros, given that some 86 percent of holders agreed voluntarily to the haircut, while collective action clauses (CACs) were activated for the rest.

The 20 new Greek bonds had yields ranging from 13.6 percent, for the 30-year bonds, to 19 percent, for the 10-year ones. This may be far smaller than the yields of the old bonds, with the 10-year debt reaching 32 percent, but it is still exceptionally high by eurozone standards. The Portuguese equivalent has a 13.6 percent coupon, while the benchmark German bond has a 1.8 percent rate.

In this context, rating agency Moody?s said on Monday that ?the risk of a Greek default, after the completion of the debt swap, remains high,? adding that despite the private sector involvement plan (PSI), the country continues to face significant problems and it is doubtful that the Greek debt will go down to 120 percent of gross domestic product by 2020.

On a more positive note, Finance Minister Evangelos Venizelos stated that ?for the first time we are able to present a success story for Greece.? He further expressed his optimism that Greece will secure ?global participation? in the debt swap program after extending the deadline for the non-Greek law bonds to March 23. Speaking to CNBC, Venizelos said that ?the market knows very well that this offer is unique, it is a very good and profitable offer.?

Also on Monday, the International Swaps and Derivatives Association (ISDA) published the final terms of an auction to settle credit default swaps (CDS) tied to Greece?s debt and an initial list of bonds that investors can deliver for settlement of the contracts. ISDA will hold an auction to settle the swaps next Monday, having deemed on Friday that the PSI constituted a credit event.

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