http://www.zerohedge.com/news/completed-ecb-bond-exchange-biggest-screwing-our-lives
Submitted by Tyler Durden on 02/17/2012 09:58 -0500
http://ekathimerini.com/4dcgi/_w_articles_wsite2_1_17/02/2012_428577
Frankfurt’s involvement in the debt haircut may reduce the country’s burden further
By Sotiris Nikas
Following the European Central Bank’s decision to swap the Greek bonds it holds with new ones, the markets are now shifting their attention to how Frankfurt will be involved in the restructuring of Greek debt.
Kathimerini understands that the most likely scenario is for bonds held by national central banks in the eurozone (totaling some 10 billion euros) -- acquired before the eruption of the financial crisis -- to suffer the same haircut that privately held bonds are to undergo in the context of the private sector involvement plan (PSI).
In contrast, there will be no haircut to the bonds acquired by the European Central Bank in the context of lending support to the Greek bond market during the crisis, amounting to about 45 billion euros.
The aim of the swap of existing ECB-held bonds with new ones is to avoid their inclusion in the compulsory haircut imposed by the likely use of collective action clauses (CACs) in the process, as the new bonds will have new International Securities Identification Numbers (ISIN), which the CACs to be imposed will not concern.
There will also be another side-benefit for the ECB from such a swap in that it will reap a profit from the new bonds, as the existing bonds were bought at a lower price than their nominal value. However, the new bonds will have the same price as the nominal value of the old ones; as a result all eyes will be on whether these profits will be used to the benefit of Greece.
At any rate, the ECB will have to distribute the benefits from the swap to the national central banks. It will then be the member-state governments’ decision whether they will spend the profits on Greece or not.
Sources suggest that the Public Debt Management Agency (PDMA), in cooperation with banks and the Athens Exchange, have created a platform for the interconnection of all repositories in the world ahead of the PSI. This platform will allow the Greek state to be updated on a daily basis about the percentage rate of involvement in the haircut.
http://www.bloomberg.com/news/2012-02-17/ecb-said-to-negotiate-with-greece-on-investment-portfolio-bond-exemption.html
Completed ECB Bond Exchange Is "Biggest Screwing Of Our Lives"
A well-known bond expert just blasted the following summary of today's "market positive" and supposedly just completed ECB bond swap.
DOW JONES REPORTS THE ECB GREEK BOND SWAP IS NOW DONE. THIS MEANS THAT EACH AND EVERY EUROPEAN BOND THAT YOU OWN IS NOW SUBORDINATED TO THE ECB AND THE EUROPEAN UNION. IF THEY CAN SWAP THEIR BONDS FOR NEW BONDS WITH DIFFERENT TERMS, NO CAC CLAUSE IN THIS CASE, THEN THEY CAN SWAP THEIR BONDS FOR ANY TERMS AND CONDITIONS THEY LIKE WHILE THE BONDS OF PRIVATE HOLDERS ARE HELD TO THE ORIGINAL INDENTURE. THE EQUITY MARKETS MAY RALLY ON THIS NEWS BECAUSE THEY ARE FOCUSED ON A DEAL GETTING DONE BUT ANYONE IN FIXED INCOME SHOULD NOW CONSIDER RETCHING UNDER THEIR DESKS AS WE ALL JUST TOOK ONE OF THE BIGGEST SCREWINGS OF OUR LIVES THAT MAY WELL NOT BE A SINGULAR EVENT.
Not just the ECB is getting out of their greek bonds and getting new greek bonds not subject
to CAC law about to be imposed - european central banks also getting out of dodge. The second story i think is inaccurate , third piece more accurate....
ECB bond tactics could assist Greece
Frankfurt’s involvement in the debt haircut may reduce the country’s burden further
 |
Following the European Central Bank’s decision to swap the Greek bonds it holds with new ones, the markets are now shifting their attention to how Frankfurt will be involved in the restructuring of Greek debt.
Kathimerini understands that the most likely scenario is for bonds held by national central banks in the eurozone (totaling some 10 billion euros) -- acquired before the eruption of the financial crisis -- to suffer the same haircut that privately held bonds are to undergo in the context of the private sector involvement plan (PSI).
In contrast, there will be no haircut to the bonds acquired by the European Central Bank in the context of lending support to the Greek bond market during the crisis, amounting to about 45 billion euros.
The aim of the swap of existing ECB-held bonds with new ones is to avoid their inclusion in the compulsory haircut imposed by the likely use of collective action clauses (CACs) in the process, as the new bonds will have new International Securities Identification Numbers (ISIN), which the CACs to be imposed will not concern.
There will also be another side-benefit for the ECB from such a swap in that it will reap a profit from the new bonds, as the existing bonds were bought at a lower price than their nominal value. However, the new bonds will have the same price as the nominal value of the old ones; as a result all eyes will be on whether these profits will be used to the benefit of Greece.
At any rate, the ECB will have to distribute the benefits from the swap to the national central banks. It will then be the member-state governments’ decision whether they will spend the profits on Greece or not.
Sources suggest that the Public Debt Management Agency (PDMA), in cooperation with banks and the Athens Exchange, have created a platform for the interconnection of all repositories in the world ahead of the PSI. This platform will allow the Greek state to be updated on a daily basis about the percentage rate of involvement in the haircut.
and this story is a more accurate take on what's happening..although I think the number is 20 billion , not ten billion
The European Central Bank is negotiating with Greece on behalf of its member central banks to exempt the Greek bonds in their investment portfolios from a debt restructuring, two euro-area officials said.
The ECB wants to swap the investment portfolio bonds for debt that’s exempt from collective action clauses, or CACs, to avoid losses in a private-sector debt restructuring, the officials said late yesterday. The central bank has already swapped Greek bonds it bought as part of its asset-purchase program for such securities, a third official with knowledge of the situation said.
Greece wants the bonds in the central banks’ portfolios to be included in a private-sector deal aimed at slicing 100 billion euros ($132 billion) off its debt, the officials said. The central banks are arguing they would have dumped the bonds if they were normal investors and that they shouldn’t be forced to take losses on them, the officials said.
An ECB spokesman declined to comment. Greek government spokesman Pantelis Kapsis wasn’t immediately available to comment.
The tussle comes as euro-area finance ministers gather in Brussels on Feb. 20 to decide on a second bailout for the embattled nation and sanction the private-sector bond swap.
Precedent
The risk for central banks is that taking losses on bonds in their investment portfolios may erode their capital. On the other hand, exempting the portfolios of euro-area central banks could encourage other public investors, such as central banks outside the currency region, to seek similar treatment.
The value of Greek bonds held by euro-area central banks other than Greece in their investment portfolios is less than 10 billion euros, another euro-area official said. Not all 17 national central banks in the euro area have Greek bonds in their investment portfolios.Germany’s Bundesbank doesn’t, the third official said yesterday.
Greece is drawing up legislation to allow the use of CACs and may submit it in coming days, two people familiar with the matter said.
CACs typically make all bondholders subject to losing part of their capital in a retrospective action that does not require the assent of all lenders.
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