March 9, 2012 / 7:09 AM / 6 years ago

Analysts' View: Greece gets 85.8 percent take-up for bond swap deal

(Reuters) - Greece claimed a major success for its bond swap offer to private creditors on Friday after it won heavy acceptance for a deal that averts the immediate risk of an uncontrolled default on its massive public debt.

The Finance Ministry said that 85.8 percent of private creditors had accepted its bond swap offer and that the rate would reach 95.7 percent with the use of collective action clauses to enforce the deal.

Following are some comments from analysts on the deal:

AKIRA TAKEI, GENERAL MANAGER OF INTERNATIONAL FIXED INCOME INVESTMENT, MIZUHO ASSET MANAGEMENT, TOKYO

“For the short-term, even though Greece used CACs, the participation rates look OK. So we may not have to worry about Greece for the time being. However, the euro zone economy is going to take a severe hit, and this is something for the ECB to manage.

“In the euro zone, we are overweight in Spanish and Italian bonds. We think both countries will be able to survive this problem. Banks in both countries are buying their own country’s sovereign debt. Eventually, banks will have to raise capital, but they may not be able to. When that happens, they will sell foreign debt first and hold on to their respective countries’ debt.”

MARK MATTHEWS, HEAD OF ASIA RESEARCH AT JULIUS BAER, SINGAPORE

“It’s the optimal outcome and unsurprisingly markets are reacting positively to it. But I was of the opinion that it was not going to spark a second round of contagion anyway. Other factors in the world have taken centre stage, first and foremost the stronger-than-anticipated recovery in the United States.”

NG KIAN TECK, LEAD ANALYST AT SIAS RESEARCH, SINGAPORE

“The question now is what will happen to all the credit default swaps in the market. This is what people want to know — is this considered a default, and if it is, who are the winners and losers? We don’t know who the losers are now and they can be quite a substantial amount because the CDS float is not small.”

SUMINO KAMEI, SENIOR CURRENCY ANALYST, BANK OF TOKYO-MITSUBISHI UFJ

“There’s still a lot of nerves about the details of the deal. We don’t know much about the timing and the nitty-gritty technicalities of how the CACs are triggered and, if that actually happens, what will be the effect of that on Greek CDSs.

“If both are triggered, than the uncertainty will only mount because no one knows who holds what amount of CDSs.

“This uncertainty may keep the euro under pressure. Very strong support is seen at the Feb 16 low of $1.2974, but my sense is that the euro’s decline is likely to stop above that line, probably even above 1.30 — at least today.”

YUJI SAITO, DIRECTOR OF FOREIGN EXCHANGE DIVISION, CREDIT AGRICOLE, TOKYO

“The headlines from Greece are within expectations and the market reaction (euro selling) is a classic case of buy the rumor, sell the fact.

“The number of private creditors accepting the bond swap offer falls in line with what had already been reported earlier, and the use of collective action clauses is also anticipated. The real question now is whether Greece will select leaders at an election scheduled next month who will abide by the agreement reached earlier with its global lenders on the austerity measures.”

SURESH KUMAR RAMANATHAN, REGIONAL RATES AND FX STRATEGIST, CIMB INVESTMENT BANK, KUALA LUMPUR

“We have been warning for the past 2 months that Greece will collapse and that collapse is beginning to play out currently. If ISDA sees the activation of CACs as a credit event, then we have an official sign of a default in Greece.

“For markets, it will be vital to gauge how much of CDS will be triggered following the activation of CACs. We are likely to see some synchronization of equities, cross currency swap basis in EUR/USD and peripheral bonds and CDS all facing a sell off.”

Compiled by Alex Richardson in Singapore

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