The Ascent of Money: A Financial History of the World by Niall Ferguson
“The shadow world of derivatives, credit-default swaps, the sales of U.S. bonds to China ; all seem to bring brilliant results, until they get too big.”
Great book ; go out there and buy it, thank me later 🙂
Archives of “credit default swaps” tag
rssISDA, Which Refuses To Declare Greece In Default, Has Given The US A 3 Day Grace Period Before A CDS Trigger
ISDA is rapidly deteriorating to rating agency status when it comes to credibility. After it made it all too clear in the past few weeks that no matter what happens it would never “determine” Greece (or any other European insolvent country) to have breached a CDS trigger (as that would apparently destroy the world), the same trade association (logically enough comprised of the same firms that make up the heart of the status quo) has joined the rating agencies, and as of last night the CME, in making it all too clear that a debt ceiling plan (preferably Reid’s because it achieves absolutely nothing) has to pass, or else, after it earlier announced that the US has precisely 3 days to cure any missed debt payment before US CDS are triggered. Obviously this can not be allowed to happen, so expect this latest development to be used by the president in his nighlty scaremongering session.
From Reuters:
 The United States would have at least 3 days to make up for any missed debt payments before it triggered payments on its credit default swaps, according to trade association the International Swaps and Derivatives Association. (more…)
Greece 10-Year Bond Oversubscribed
LONDON—The Greek government’s offering for a 10-year bond attracted around €14.5 billion ($19.86 billion) in bids and the books have closed, the head of the country’s debt-management agency said Thursday.
“We are very happy with the bid because the re-entry into the market is always challenging. It went very well,” Petros Christodoulou said. The government aimed to raise €5 billion from the offering but it was heavily oversubscribed.
The offering—timed to coincide with an improving market for Greek government debt in the wake of tough budget cuts announced a day earlier—is a move to help cover short-term funding gaps.
Lead managers are Barclays Capital, HSBC Holdings, National Bank of Greece, Nomura and Piraeus Bank SA, one of the lead managers on the deal said.
Adjusted price guidance for the new issue is now 3.00 percentage points over the benchmark risk-free mid-swaps rate, reflecting the market’s demand for a premium.
An issue size of €5 billion for Greece’s new 10-year bond “would be a good result” but not enough to fully cover Greece’s near-term funding needs, said UniCredit strategist Luca Cazzulani.
Greek bond yields in secondary markets moved up on the news. The yield spread between Greek 10-year government bonds over equivalent German government bonds widened to around 3.03 percentage points from Wednesday’s close at 2.92 percentage points.
The cost of insuring Greek sovereign debt against default also rose slightly. The price of Greece’s five-year sovereign credit default swaps increased to 3.05 percentage points, from 2.945 percentage points, representing a €10,500 increase in the annual cost of insuring €10 million of debt for five years.
Greece, the European Union’s most indebted country, will face its biggest challenge in April and May this year, when more than €20 billion of debt comes due for repayment. So far, Greece has raised €13.6 billion via the sale of Treasury bills and an €8 billion bond syndication, the Public Debt Management Agency said. Greece plans to issue a total of €54 billion in debt this year.
While Greece has been encouraged by its ability so far to raise funds from public markets, the cost of issuing new bonds remains high. The yield on 10-year Greek government bonds has risen to as high as 3.40 percentage points over equivalent German bunds, from low-double-digits before the start of the financial crisis.
Greece’s latest set of spending cuts and tax increases aims to cut the country’s gaping budget deficit by €4.8 billion or about 2% of gross domestic product, and follows pressure from the European Commission, the EU’s executive arm, which said last week that Greece’s previously announced measures weren’t tough enough.
Greek officials worry that its budget cuts won’t be enough to restore investor confidence in Greek debt unless the government receives detailed financial backing from the European Union.
Greek Finance Minister George Papaconstantinou said in Athens Wednesday that if Greece can’t rule out turning to the International Monetary Fund for assistance if Greece needs help and euro-zone partners won’t give it.
IMF financing would need approval by European countries on the IMF’s board. Most euro-zone governments have made clear they want a European solution to the Greek crisis rather than IMF intervention, to show the euro zone can handle its own problems.
Greece is rated A2 by Moody’s Investors Service and BBB+ by Standard & Poor’s Corp. and Fitch Ratings Inc.
Germany Ban Short Selling
Germany’s financial-markets regular said it is banning naked short-selling of certain euro-zone debt and credit default swaps as well as some financial stocks effective at midnight local time, saying “excessive price movements” could endanger the stability of the financial system.
The ban will remain in effect through March 31, 2011. (more…)
Regulators to probe euro trades
The regulatory fall-out from the Greek debt crisis grew on Wednesday as EU and US authorities said they would probe trades in the euro and the market in sovereign credit default swaps. European Commission officials said they would use a meeting as early as Thursday with banks and regulators to discuss regulation of trading in sovereign CDS, which have become politically contentious amid Greece’s financial crisis. The US justice department said it was also examining hedge fund trades against the euro.