Default swaps on Greek debt may pay out if losses exceed 21 pct threshold
Credit-default swaps insuring Greek government debt may pay out should proposals to increase losses on the bonds exceed the 21 percent already agreed, according to analysts.
Deeper cuts would likely have to be imposed on bondholders, triggering a credit event on the swaps contracts, analysts at Barclays Capital, Evolution Securities Ltd. and Credit Agricole SA said.
Luxembourg Prime Minister Jean-Claude Juncker triggered speculation that so-called haircuts on Greek bonds could exceed 60 percent when interviewed on Austrian television on Wednesday. Finance ministers are considering reshaping a July deal that foresaw investors contributing 50 billion euros ($69 billion) to a 159 billion-euro rescue.
?There?s increasing evidence everything is going to a bigger restructuring of Greece and that?s going to be difficult to engineer without triggering CDS,? said Thomas Harjes, a senior European economist at Barclays Capital in Frankfurt. ?It?s very likely banks won?t voluntarily agree to that.?
Credit-default swaps on Greece cover a net notional $3.7 billion, according to the Depository Trust
