Greece Likely to Cut, Delay Payments to Bond Investors, Goldman Sachs Says

April 22 (Bloomberg) -- Greece is likely to cut or delay payments to bond investors even as the country negotiates a bailout package with the European Commission and International Monetary Fund, according to Goldman Sachs Group Inc.

“Look out for signs that the government might offer a voluntary debt-restructuring arrangement sometime over the next few months,” Erik F. Nielsen, chief European economist at Goldman Sachs in London, wrote in a report. “A large multi-year official rescue package combined with a voluntary debt restructuring would create a much longer breathing space for the government to undertake the necessary reforms.”

Greek 10-year bonds dropped for the eighth day today as Prime Minister George Papandreou’s government began a second day of talks in Athens with euro-region and IMF officials on a 45 billion-euro ($60 billion) aid package for the country. The yield premium investors demand to hold the debt instead of benchmark German bunds exceeded 5 percentage points for the first time yesterday.

“Markets are in the process of pricing in some kind of rescheduling or exchange,” said Robin Marshall, who helps oversee about $20 billion as director of fixed income at Smith & Williamson Investment Management in London. “The protracted nature of the resolution of this is not helping sentiment.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUMHiIj6fFNY&pos=1

 

# CMA Datavision reports Greek five-year CDS have jumped to a record high of 505 basis points versus 485.7 bps in the previous session;
# Greek/German 10-year government bond yields retreat to 518 basis points, after hitting a 12-year high of 532 bps on Wednesday.
# Markit reports Portugal CDS are now trading at a record wide of 248 basis points, versus 245 bps the previous day

 

Looks like they overhedged and end up net short Greece

 

It's all about selling insurance...

A Charlotte, North Carolina man, having purchased a case of rare, very expensive cigars, insured them against .... get this .... fire.

Within a month, having smoked his entire
stockpile of fabulous cigars, and having yet
to make a single premium payment on the policy, the man filed a claim against the insurance company.

In his claim, the man stated that he had lost the cigars in "a series of small fires."

The insurance company refused to pay, citing the obvious reason that the man had consumed the cigars in a normal fashion.

The man sued ... and won!!

In delivering his ruling, the judge stated that since the man held a policy from the company in which it had warranted that the cigars were insurable, and also guaranteed that it would insure the cigars against fire, without defining what it considered to be "unacceptable fire," it was obligated to compensate the insured for his loss.

Rather than endure a lengthy and costly appeal process, the insurance company accepted the judge's ruling and paid the man $15,000 for
the rare cigars he lost in "the fires."

After the man cashed his check, however, the
insurance company had him arrested... on 24
counts of arson!

With his own insurance claim and testimony from the previous case being used as evidence against him, the man was convicted of intentionally burning the rare cigars and
sentenced to 24 consecutive one year terms.

 

24 years for smoking?Only in the US

 

He got smoked. (it will be reduced if not thrown on appeal)

what do u mean overhedged in Greece. what are the two sides?
thx:

 

They probably have some credit exposure there, their desk overhedged and now the research team is making sure they wont miss on Q2 earnings by claiming Greece defaults

 

http://urbanlegends.about.com/library/blcigar.htm

 

That sounds like good fodder for an episode of Law & Order.