TT bet against Greece

State-controlled Hellenic Post Bank (TT) spent nearly 1 billion euros last year to secure its positions against the possible bankruptcy of the Greek government, according to documents seen by Kathimerini. In August, the bank bought credit default swaps (CDS) – a form of insurance on financial instruments – worth 950 million euros when the spread on the Greek five-year bond over the German Bund was at 135 basis points. CDS products allow investors to purchase protection against the default of debt issued by governments, hedging existing positions. TT’s management, which changed after the Socialists took power in October, sold the CDS when the spread was at 235 basis points in December, earning a profit of some 35 million euros, the documents show. The bank’s position in CDS protected the lender from its exposure in Greek bonds but also provided it with an opportunity to play a part in the global CDS market worth some 8 billion dollars last year. With a position totalling 950 million euros, or 1.2 billion dollars, TT had the ability to shape momentum in the speculative derivatives market which the Greek government wants to be controlled. Prime Minister George Papandreou is among the global leaders that have been pushing for increased financial market supervision of CDS and a crackdown on market manipulation. TT’s previous CEO, Angelos Philippidis, had said in his last press conference as head of the bank last year that the swaps were part of the lender’s «social role,» giving it the ability to tackle speculators targetting Greece.

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