Saturday, March 10, 2012

Debt crisis and Greek bond swap: as it happened - March 9, 2012

I welcome the cooperation of the private sector in participating in the debt exchange offer by the Greek authorities. This is an important step that will dramatically reduce Greece?s medium-term financing needs and contribute to debt sustainability. The IMF?s continued support would be part of an integrated package where all parties?the Greek government, its European partners, the private sector, and the Fund?would play their part to help the Greek people overcome this crisis and over time restore growth, thus contributing to broader global financial stability.

21.09 ISDA doesn't see significant impact on markets from Greek default. CDS exposure largely collateralised. ISDA doesn't see any challenges to the ruling.

21.00 US markets have closed. The Dow has closed up 0.1pc, the S&P 500 has risen 0.4pc and the Nasdaq has climbed 0.6pc.

20.58 Here is a great graph showing bank and bond defaults over the past 30 years:

(For a bigger version of this graph, click the right-hand-side of the main picture at the top of this blog)

20.55 Louise Armitstead has summed up the day's events in Greece:

After a marathon seven-hour meeting, the International Swaps & Derivatives Association (ISDA) tonight dramatically declared a "credit event had occurred" and billions of euros of credit default insurance will have to be paid out. The credit default swap (CDS) market is opaque but analysts estimate the ruling will cost European banks around ?3.5bn. Even so, bankers were relieved by the decision ? the opposite call could have undermined investor confidence in the entire CDS market.

20.51 ISDA is to meet again on Monday to further discuss Greek default.

20.44 A trip down memory lane now:

Then-ECB Jean-Claude Trichet in April 2010: "I've always said publicly that [a Greek] default is out of the question."

Economic and Monetary Affairs Commissioner Olli Rehn in April 2010: "There will be no [Greek] default."

20.36 Reuters is reporting that Germany wants a new debate on the EU constitution. The country's foreign minister Guido Westerwelle told reporters on the sidelines of a meeting of EU foreign ministers in Copenhagen:

Quote We have to open a new chapter in European politics. We need more efficient decision structures. I think we have to reopen the debate about a European constitution again. We have a good treaty, but we need a constitution ... There are new centres of power in the world.

20.28 I see a few comments about where banks will find the money to cover the CDS payouts.

Bloomberg is reporting that "Austria is facing a capital injection of as much as ?1bn into KA Finanz two weeks after bailing out Oesterreichische Volksbanken. In a statement today before ISDA?s decision, KA Finanz said it may have risk provisions of about ?1bn if credit- default swaps on Greece it has written are activated."

20.21 Justin Urquhart Stewart, co-founder of 7 Investment Management, on that default announcement:

20.14 In the US markets, the Dow fell sharply after that announcement by the ISDA. At the moment the Dow is up 0.1pc, the S&P 500 is up 0.3pc and the Nasdaq is up 0.5pc.

19.59 Auction to be held on March 19 in respect of all outstanding Greek CDS transactions. ISDA to hold press conference at 9pm GMT.

19.46 BREAKING NEWS...

ISDA confirms Greece has defaulted, paving the way for $3bn CDS payouts that investors purchased to hedge against the risk of holding Greek sovereign debt. The vote was unanimous.

Here is the statement in full:

ISDA

And the voting:

ISDA2

19.38 Derivatives Intelligence (DI) has now posted this image on Twitter of the ISDA website stating that a credit event has occured, which DI based its story on:

We are still waiting for an official announcement.

19.13 Derivatives Intelligence (part of Institutional Investor) put a story up on its website saying ISDA had agreed that a default had occured in Greece, only for it to quickly take the story down. ISDA has put out a statement saying the piece was "incorrect".

We are still waiting.

19.06 Mark Broad, BBC economics producer, on that ISDA announcement we are all waiting for to make CACs official:

18.47 German Chancellor Angela Merkel: "The biggest challenge for Europe is to get out of debt trap. Cuts in Spain, Portugal and Greece have been necessary." She adds that "Europe is our future" and it must become more competitive, must measure up against the best in the world.

18.36 Greek PM Lucas Papademos has started speaking. He says the debt swap is a historic achievement, but today is a moment to reflect, not rejoice.

Quote Upon completion of the largest debt restructuring ever made, it opens a window of opportunity and hope for Greece. This is a major, I would say historic, success, made possible by the systematic and coordinated efforts of many hard. With the help of our partners, with the sacrifices of the Greek people and the cooperation of the political forces supporting the government, we brought out a very difficult task.

Upon completion of the remaining steps, the final approval and signing of loan agreements for the next two weeks, moving away from the quicksand of the past months. Press on solid ground now. For the first time that Greece does not add, but remove debt from the backs of its citizens and future generations. By reducing the debt by about 105 billion euros, the Greeks can see the future with greater confidence.

Today is not only satisfying day for what has been achieved. It is also an opportunity for reflection. Because we know that savers and investors, including thousands of ordinary citizens of this country, suffered significant damage [financial loss]. And that requires us to think about our mistakes, which forced us to lead the restructuring of debt. This also reinforces our will and our determination to change Greece.

Debt restructuring is a practical recognition of the efforts of Greece. It is an expression of confidence about the prospects of the country and our future in the Eurozone. Creates conditions to return deposits, to invest, to retake the economy forward, create jobs for young people. We have before us a large hill. The money you save on interest and amortization, we have no right to squander. We need to utilize to modernize the structures of the country, to make our economy competitive, to tidy up the state.

Through the deep recession and tribulations of the Greek people is becoming a promising prospect of leaving the worst crisis of the postwar period. The trust is restored. The support of our partners confirmed. But ours is a crucial responsibility to shape the course of the country. To change our economy to keep upright in our society, to defend our position in the euro, to win the future. We have a new opportunity. Let us not lose it.

18.32 For all the information on the Greek debt swap, our economics correspondent Angela Monaghan has written a handy Q&A.

18.22 Still waiting for that statement from Greek PM. We are hearing it will be "shortly".

18.12 US President Barack Obama believes the US economy is "getting stronger" following positive jobs figures out earlier today (see 13.31).

17.45 Dow Jones is reporting that ISDA has said its decision can only be made once CACs are formally activated by Greece.

Remember, the ISDAs ruling will decide whether CDS payouts will be enacted over the Greek debt swap.

17.13 We are expecting a statement from Greek PM Lucas Papademos at 6pm GMT. We'll have the latest here.

17.08 Don't forget to visit our interactive graphic on the Greek debt deal.

16.40 IIF Managing Director Charles Dallara tells CNBC: "The voluntary, negotiated nature of this [debt swap] deal is notable."

(I wonder how he is using the word "voluntary")

Dallara adds that the debt deal will provide benefits to Greece and that investors in European debt will have to do more careful risk analysis. He expects the swap to be completed by Monday.

16.33 European markets have closed. The FTSE 100 rose 0.6pc, the DAX was up 0.8pc, the CAC climbed 0.4pc, the IBEX fell 0.2pc and the MIB dropped 1.1pc

16.20 Greece has triggered so-called collective action clauses to force holdouts to accept a bond swap that should erase more than ?100bn in debt and unlock a new bailout, a government source told AFP.

The decision was taken by the Greek government after having agreed with its eurozone partners that the move was the best solution to ensure maximum participation in the deal.

16.16 Fitch has said that the Greek debt swap is manageable for European insurer.

16.07 European Central Bank Executive Board member Benoit Coeure: "Europe needs single financial regulation rulebook."

16.01 Greek Cabinet reportedly approves CACs on debt swap, according to an unnamed official.

15.58 Interesting comment by Paul De Grauwe, John Paulson Chair in European Political Economy at the LSE?s European Institute. He argues that Europe's banks are still wracked with uncertainty, despite the ECB's two LTRO eforts:

Quote The European Central Bank has delegated its lender of last resort duty to panicky bankers who are the slaves of market sentiments. In doing so, doubts continue to exist as to the stability of the sovereign debt markets in the Eurozone.

15.47 We are hearing that the Greek Cabinet is holding a meeting at 4pm GMT. We'll have the latest here.

15.44 While we wait, here's Bloomberg TV's take on the debt swap:

15.41 We are hearing that the decision from the International Swaps and Derivatives Association on whether the Greek debt restructuring amounts to a "credit event" (i.e. a default) could be another hour.

15.30 Linda Yueh, Economics Editor at Bloomberg TV:

15.21 Meanwhile, Reuters is reporting that S&P has said that certain threats to US credit and economy have diminished or at least stabilised.

"Today's employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression," said Alan Krueger, chairman of President Barack Obama's Council of Economic Advisers.

However, S&P added that some risks are increasing, including building asset bubbles and larger than expected losses in residential real estate.

15.11 Fitch Ratings has downgraded Greece to "restricted default", citing previous commentary that debt swap would constitute a sovereign credit event.

15.07 Christopher Adams, markets editors at the Financial Times:

15.02 BREAKING NEWS...

UK GDP grew by 0.1pc in the three months to February after 0.2pc fall in three months to January, according to NIESR.

The institute said: "Avoiding a return to recession is obviously welcome, but at present the UK economy can best be described as ?flat?. We expect the UK?s economic recovery to take hold in 2013... Unless output turns down again, the recession is over, while the period of depression is likely to continue for some time."

14.55 Mohamed El-Erian, chief of PIMCO, has told Bloomberg TV that "Greece and Portugal are insolvent; Spain and Italy are different."

He adds that markets are pricing in another Greek PSI some time in the future.

14.48 An Athens appeals court has ruled against a former member of Parliament who demanded more than ?400,000 in back pay over the period 2003-7, AP has reported. The case hinges on extra bonuses similar to those awarded to judges over a four-year period.

The claim caused an uproar in crisis-ridden Greece when it was disclosed in December 2011 that about 150 former and current lawmakers were demanding back pay.

14.15 Christine Lagarde, IMF chief:

Quote We welcome the cooperation of the private sector in participating in the debt exchange offer by the Greek authorities. This is an important step that will dramatically reduce Greece's medium-term financing needs and contribute to debt sustainability. This support by the private sector is a key component of the contribution by all parties to put Greece's economy on a path of growth and financial stability.

14.03 Bloomberg reports that finance ministers in the eurozone have released ?35.5bn of aid for Greece and backed the debt swap with private creditors, including the use of collective action clauses. Jean-Claude Juncker, head of the group of euro-region finance chiefs, said: ?The necessary conditions are in place to launch the relevant national procedures required for the final approval of the euro area?s contribution to the financing of a second Greek rescue package.

"The Eurogroup was encouraged by the high private sector participation in Greece's debt exchange offer, which will make a significant contribution to improve Greece's debt sustainability. In this context, the Eurogroup was informed that Greece will activate the Collective Action Clauses applicable to bonds governed by Greek law."

Here is his statement in full:

juncker

13.59 More on those better-than-expected US jobs figures:

Richard Driver, analyst for Caxton FX, said:

Quote Today?s US non-farm payrolls figure came in above expectations and represents yet another positive from the world?s biggest economy, it really is going from strength to strength.

"With the eurozone heading in to recession and China slowing down, the US economic growth is the only genuine good news story for the market to enjoy at present. Investors are clearly still very suspicious about the Greek situation and risk appetite remains hemmed in.

"The US dollar has rallied on today?s jobs figure, which supports our view that the upward trajectory in US growth will make 2012 a strong year for the greenback. We also see EUR/USD below $1.30 this month.

13.54 Wolfgang Schaeuble, the German finance minister, says the ISDA decison of Greek CDS won't affect aid. He has also ruled out another restructuring like Greece, which will be worrying for Portugal, Italy and Spain.

Hitting out at Greece, Schaeuble says the country shouldn't blame the EU or Germany as it can't expect others to help it, it needs deep structural reforms.

13.49 However, Raoul Ruparel, Open Europe?s Head of Economic Research, disagrees:

Quote With the use of CACs Greece has entered a coercive restructuring or default ? something which Greece and the eurozone have spent two years trying to avoid. While the financial markets can handle the triggering of CDS that this will entail, at some point serious questions need to be asked over the amount of time and money which policymakers have wasted on what has ultimately amounted to a failed policy. Instead, Greece should have undergone a full restructuring combined with a series of pro-growth measures... This deal could end up being a pyrrhic victory: the debt relief for Greece is far too small which means that another default could be around the corner, while the austerity targets are wholly unrealistic and kill off growth prospects.

13.39 After saying yesterday that the financial crisis is behind us, French President Nicolas Sarkozy now says the Greek problem has been solved:

Quote I would like to say how happy I am that a solution to the Greek crisis, which has weighed on the economic and financial situation in Europe and the world for months, has been found. Today the problem is solved. A page in the financial crisis is turning.

13.31 BREAKING NEWS...

US jobless rate holds at 8.3pc in February. Non-farm payrolls beat estimates - up 227,000 compared with expected 210,000. Trade deficit widens 4.3pc in January to $52.6bn.

So, the US economy created more jobs than forecast last month, sustaining a run of better news from America's jobs market.

13.23 Asked about the possibility of a debt swap in other countries, Wolfgang Schaeuble, the German finance minister, said Greece was a special case. He added that he was not concerned that a Greek default would endager German banks. However, he thinks it's a mistake to think that the Greek crisis is completely solved.

13.04 Markets remain underwhelmed by the agreement in Greece. The FTSE 100 is down 0.1pc at 5853.75, while the DAX in Frankfurt is up 0.3pc and the CAC 40 in Paris is up 0.1pc.

12.40 Evangelos Venizelos, the Greek finance minister, said Greece is still ?7bn short of its targeted debt cut of ?107bn. He confirmed all bonds issued under Greek law would be part of the deal because of the collective action clauses, while those holding bonds issued under foreign law would be given until March 23 to decide. Mr Venizelos said they would be "naive" to expect a better deal.

Evangelos Venizelos, the Greek finance minister, comments on the deal at a press conference

12.30 Christine Lagarde, head of the Internation Monetary Fund, also reacted postively, saying the "real risk of a crisis, of an acute crisis, has been, for the moment, removed."

12.14 While we await news from the International Swaps and Derivatives Association, which will shortly declare whether or not the Greek debt restructuring amounts to a "credit event" (i.e. a default), here are comments from the European Commission's Olli Rehn:

Quote I am very satisfied by the large positive turnout of the voluntary debt exchange in Greece. It is a decisive contribution to financial stability in the euro area as a whole.

Investors recognise that Europe has committed an important amount of funds to this voluntary debt exchange and to the Greek program to move forward. I now expect the Greek authorities to maintain their strong commitment to the economic adjustment programme and to rigorously and timely implement the policy package.

11.46 The German Government says its leader Angela Merkel is "encouraged" by the Greek debt deal. It adds the second bailout package for Greek will be discussed at the Eurogroup meeting next week.

10.53 There are further signs that the European Central Bank's intervention in the European banking crisis is easing funding conditions. The ECB has pumped more than ?1 trillion into the system through cheap, long-term loans to the banks.

Euribor - euro-priced bank-to-bank lending rates, have fallen to a new 17-month low, suggesting banks have greater faith in the strength of the banking system, and are less fearful of a bank collapse. Euribor is now approaching the record lows they hit in early 2010.

Three-month Euribor rates, the benchmark measures, fell to 0.894pc from 0.902.

10.30 Kathleen Brooks, of Forex.com, warns of a number of loose ends that result form the Greek bond swap:

OpinionAthens and co. may have pulled off the biggest debt re-structuring in history but this is unlikely to be the end of the saga. Firstly, this debt swap still has some loose ends. Later this afternoon we will hear whether credit-default-swaps on Greek debt have been triggered.

The chances are that since CACs have been applied they indeed will have been triggered and right now the 5-year Greek CDS is priced at 26,000, this compares with 613 for Ireland and 396 for Spain. So the markets aren?t treating all of peripheral Europe as they treat Greece, which should come as a relief for EU authorities.

She explains what a CDS trigger will mean

OpinionRough estimates suggest that there is $3bn of insurance written on Greek debt, this compares with about $5.7bn for Lehman Brothers. That means that some banks somewhere owe some investors somewhere $3bn, no small chunk of change.

Details are patchy as CDSs' are traded off exchange, but if the swap is triggered it doesn?t mean that those private sector investors who have just seen the value of their Greek bond holdings get slashed by more than 50pc will receive the insurance pay-out. This is because a CDS isn?t really insurance and you can buy it even if you don?t own the underlying? A bit like someone else owning insurance on your home and receiving the pay-out even if your home burns down?

And that?s not the only lose end.

Opinion Added to this, the debt swap is all about getting Greek debt down to sustainable levels, which is far from certain and there may need to be further bailouts/ debt swap deals down the line. No fiscal data for Greece is yet available for 2012, however, the EU/ IMF growth forecasts for Athens are considered optimistic even though they are forecasting another 4pc contraction in the economy this year. This comes after a larger than expected 7.5% contraction in the economy in Q4 2011, announced earlier this morning.

So even though Greece has already implemented an extra ?3bn of austerity cuts earlier this year, more cuts will need to come possibly after the April general election. Only if more austerity and weak growth fail to push the debt levels lower will larger debt write-downs be considered, in our view.

Greece's economics woes have not disappeared - forecasts are for more financial storms ahead

10.15 For all its crowing of success, Greece has not really allayed default fears.

Peter O'Flanagan, Head of Foreign Exchange Trading at Clear Currency, lists a number of factor are weighing on the euro:

Quote1. New Bonds are already quoted at distressed levels, already pricing in a default.

2. Collective Action Clauses to be used to increase this participation to the high 90%

3. The market is still awaiting ISDA to confirm whether or not the bond swap is a credit event, thus triggering billions of Euros in CDS.

10.00 Just after The Greek Finance Minister addressed parliament, figures were released showing the Greek economy contracted faster than expected in the final quarter of 2011. Fourth quarter GDP shrank by 7.5pc year on year, against an earlier estimate of 7pc.

This lends credibility to the view that the worsening economy will erode the benefits from today's debt deal and leave Greece vulnerable to a third bailout down the road.

09.52 Evangelos Venizelos has addressed the Athens parliament about the results of the debt swap deal. He told MPs that the Private Sector Involvement has been "highly successful".

He said the deal was "historic for Greece", the voluntary debt deal "surpassed expectations", it was an "impressive and unprecented success".

09.50 Italy is also suffering. Industrial production in the country dropped by 2.5pc in January from December, the official data agency Istat said on Friday, after the economy entered recession in the second half of 2011.

The drop was far bigger than the 0.8p forecast by economists and comes after a rise of 1.2pc in December. Industrial production was down 5pc over a 12-month period in January, while economists had been expecting a fall of just 0.5pc. It doesn't bode well for recovery.

09.40 UK industrial output suffered a shock fall in January, raising doubts about whether the economy will rebound after contracting at the end of 2011. The Office for National Statistics said output fell 0.4pc in January after a 0.4pc rise in December. Economist had forecast an increase of 0.3pc.

While, Brits expect inflation to fall this year the Bank of England's February inflation attitudes survey showed average public inflation expectations for the next 12 months fell to 3.5pc from 4.1pv in the November survey, hitting the lowest level since August 2010 but still well above the 2pc target.

It all depends on the oil price. Brent crude was trading at $125.40 a barrel on Friday.

A broker in Frankfurt watches the muted stock market response to the Greek bond swap - the biggest debt restructuring in history.

09.30 Market relief the Greek debt remains muted. The FTSE 100 is up 4 points, with Germany's DAX and France's CAC up 26 points and 0.3 points respectively.

Italy's MIB, Spain's IBEX and Greece's Athens Composite are all slightly down.

Jason Gaywood, consultant at currency specialist HIFX, says European currency and equity markets have shown little reaction to the Greece news:

Quote The take up of this deal which is widely seen as ?the least bad option? means that Athens can force the majority of remaining dissenters to take the deal by enforcing retroactive Collective Action Clauses.

He is rather biting about the deal and EU attempts at action:

Quote With regard to motivation, the repeated measures being thrashed out across the EU appear to be far more politically motivated than borne out of recognised economic sound thinking. This debt swap and the recent flooding of EU banks with a trillion cheap euros smacks of a desperate face saving attempt by EU politicians to keep the increasingly Frankenstein like eurozone patient alive.

The irony of the Greek deal is that the haircut is likely to trigger insurance payments to some international bond holders. These payments will be levied against, among others, already embattled Spanish and Italian insurance companies who would not survive if it wasn?t for the aforementioned ECB bailout ? this sounds remarkably like robbing Peter to pay Paul.

09.22 Muddying the water on whether Greek use of retrospective enforcement clauses in bond constitutes a credit event has a occurred is Italy?s Deputy Finance Minister Vittorio Grilli.

?We have been struggling to understand exactly what CACs imply for credit or non-credit events and it is not clear,? he said in an interview with Bloomberg News in Rome.

He also believes that even if the country?s debt restructuring triggers credit default swaps - insurance against a bond debt - the market won't react, claiming ?it is already priced in?.

We will have to see.

09.05 Echoing Ambrose's view that could see more debt deals with private bondholders in other eurozone states, is Antonio Garcia Pascual, Chief Southern European Economist at Barclays Capital. He told Bloomberg TV that if the debt deal gets approved he thinks attention will turn to Portugal - but not this year.

09.00 Ambrose Evans-Pritchard is looking past the muted market relief at today's Greek bond deal. He writes:

Quote Europe has ring-fenced Greece's debt crisis for now but its escalating recourse to legal legerdemain has shattered the trust of global bond markets and may ultimately expose Portugal, Spain, and Italy to greater danger.

He quotes Marc Ostwald from Monument Securities, who said: "The rule of law has been treated with contempt. This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Portugal."

Ambrose adds:

Quote Bondholders are not waiting to learn whether Europe will keep its word this time. There has been no rally in Portuguese debt since the ECB flooded banks with ?1 trillion. Ten-year yields are stuck at 13.2pc. Return to market access is a distant dream.

The risk for Europe is that investors will charge a "political risk" premium to invest in any EMU country subject to EU legal whim. The greater risk is that Euroland's crisis rumbles on as fiscal contraction in Italy and Spain plays havoc with debt dynamics, and reforms come much to late to close the North-South trade gap.

Europe's handling of Greece has guaranteed that global funds will rush for Club Med exits at the first sign of trouble. The next spasm of the debt crisis will that much dangerous if it ever comes. As the saying goes: Hell hath no fury like an abused bondholder.

08.55 Ed Conway, Sky's Economics Editor and the former Daily Telegraph Economics Editor, tweets:

08.50 At 13:00 London time there will be telephone conference of the Eurogroup to discuss the outcome of the bond swap.

Citigroup analysts say that comments from French Finance Minister (see entry at 06.45) are anything to go by, the eurogroup is likely to welcome the outcome of the debt exchange and probably will give the green light for going ahead with the second Greek bailout package.

08.32 Citigroup says the ?104.4bn cut in Greek debt from the bond swap falls short of the targeted ?107bn required by the Troika. It notes:

OpinionThe Greek Finance Ministry says the combination of the participating Greek law bonds ? where all bonds with a face value of ?177bn are forced through the CACs to participate - and the ?20bn of foreign law bonds, will add up to around ?197bn. A 53.5pc haircut of these bonds will lead to a contribution of the private sector of ?104.4bn, falling short of the targeted ?107bn required by the Troika.

Hence, in order to meet the ?107bn target, Greece needs more participation in the exchange of the foreign law bonds. If the voluntary participation for the foreign law bonds is not large enough to use CACs, Greece might decide at a later stage to default on those bonds. Finance Minister Evangelos Venizelos warned investors that after March 23, when the exchange period for the foreign law bonds ends ?there will be no further opportunity for creditors holding those instruments to benefit from the package of the EFSF notes, co-financing and GDP linked securities which form an important and integral part of our invitations.

08.30 European markets are flat and the euro is down against the dollar at $1.3229.

08.20 The decision by the International Swaps and Derivatives Association on whether the use of Collective Action Clauses in the Greek law bonds will be a credit event, triggering CDS payouts, is exercising many in the market.

Many expect the ISDA committee - consisting of 10 credit defult swap dealers and five other institutions, mainly hedge funds - to say a credit default has occurred. If they don't, it will bring into question the whole CDS market and whether the insurance is worth having.

A payout is expected to be around $3.2bn. It will not immediate and the exact amount of money changing hands will be determined by an auction procedure which is expected to take place in the coming weeks.

Questions are also being asked about why Greece bondholders the ECB and EU states that supplied the first ?110bn bailout have avoided taking a haircut.

The committee meets at 13.00 London time.

08.02 There has been some good economic news today:

German exports bounced back in January, helped by strong demand from outside the ailing eurozone, widening the trade surplus to ?14.2bn from ?13.9bn the previous month.

China's inflation fell sharply in February, giving Beijing more leeway to stimulate its slowing economy. Consumer prices inflation fell to 3.2pc from January's 4.5pc, the government reported. Inflation in politically sensitive food costs declined even more markedly, falling to 6.2pc from the previous month's 10.5pc.

08.01 Germany's DAX has risen 11.87 and France's CAC was little changed. Commentators say that

08.00 FTSE 100 opens down 2 points - or 0.05pc - to 5856.72

This is how ordinary Greeks were feeling last month, will a debt deal extinguish that anger?

07.40 Stefanos Manos, a former Greek minister, told Bloomberg TV why the debt swap is good for Greece, but maybe not the EU:

QuoteGreece faces fewer interest payments. We got a reprieve. Whether it is good for Europe I have my doubts.

While Greek Government spokesman Pantelis Kapsis said the result was a "vote of confidence" in Greece's ability to carry out deep structural reforms to its stricken economy.

QuoteI think it's a historic moment.

07.35 The yield on Italian and Spanish 10-year bonds have dipped after the bond swap as contagion fears recede. The yields are now 4.75pc and 4.98p.

It looks like the debt deal has been priced in.

07.30 Greece may have avoided a messy default but many commentators remain worried about its prospects. Some are sceptical of the assumption used to calculated the benefits for Greek debts from thebond swap. The economy has weakened further since then and youth unemployment is now above 51pc.

Michael Kemmer, general manager of German bank association BdB, told Bloomberg:

QuoteWe can't think that Greece is saved and the crisis is over. This is an important step - the private sector showed solidarity. That's good, but the work has only just begun.

Despite all the justified happiness about this issue we have to note that Greece is only buying time with this and has to do its homework and pursue budget consolidation, savings and its privatisation programme.

07.20 Fears of a CDS payout has triggered selling of the euro. We'll know more later today:

07.00 Asian markets rose, with Tokyo's Nikkei rising 1.65pc to close at it highest level in more than seven months on optimism over a Greek debt deal. At one stage it rose above 10,000 mark for the first time since August 1.

Hong Kong's Hang Seng rose 0,9pc, South Korea's Kospi gained 0.88pc, and Australia's S&P/ASX 200 added 1pc.

Markets on the Continent are expected to extend yeterday's gains when they open in around a hour's time. Although financial spread-betters say the FTSE 100 could open around 3-4 points, or 0.1pc, lower, pausing for a breath after strong gains in the previous session as investors seek direction from US jobs data this afternoon.

06.45 The French finance minister says the bond swap is good nes and avoids default risk.

Reuters reports that Francois Baroin told RTL radio:

QuoteIt's good news, its a good success. It's something that allows us to stay on a voluntary basis that avoids the risk of default.

He said he also had confidence in the Spanish government's ability to resolve its large deficit pile.

06.40 The euro fell against the before the announcement and then picked up:

Euro edges higher after the news the 85.8pc of bondholders accepted the bond swap. Graph: Bloomberg

06.30 Here's a flavour of how those in the market view the deal:

NG KIAN TECK, SIAS RESEARCH, SINGAPORE

QuoteThe 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."

YUJI SAITO, CREDIT AGRICOLE, TOKYO

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

SURESH KUMAR RAMANATHAN, CIMB INVESTMENT BANK, KUALA LUMPUR

QuoteWe 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.

06.22 Josef Ackerman, the respected German banker and chairman of the Institute of International Finance, which helped broker the bond swap for private investors, said the debt deal will help contribute to restroring stability in the eurozone, Bloomberg reports. It quotes him saying:

QuoteThe very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program, while strengthening the euro area?s ability to create an economic environment of stability and growth.

The successful completion of the debt exchange will contribute meaningfully to facilitating the official financing for Greece and help Greece to carry out necessary reforms to set the basis for economic recovery. These are important steps towards resolving the Greek debt crisis, addressing the overall fiscal and sovereign debt problems in the euro area, and restoring financial stability, which is essential to foster economic growth and job creation.

06.20 Greek Finance Minister Evangelos Venizelos, calling the swap an "historic event", in extending its offer to private creditiors holding bonds not governed by Greek law to March 23, warned:

QuoteThere will be no further opportunity for creditors holding those instruments to benefit from the package of ESFS notes, co-financing and GDP linked securities, which formed an important and intergral part of our invitations.

06.15 If a credit event is declared it will create even more uncertainty.

06.10 The Greeks may be happy, but its now universal.

06.09 The International Swaps and Derivatives Association will now meet at 1pm today to decide it the use of Collective Action Clauses constitutes a credit event. If it decides whether Greece has officially defaulted CDSs - insurance against default - will be triggered.

Philip Shaw, economist at Investec, says:

OpinionThe use of the CACs would make it more difficult to argue that this is not a credit event, thereby triggering a CDS payout. However this is not necessarily the catastrophe that many fear. The net exposure to Greek CDSs is relatively small at $3.2bn and one could argue that making sovereign debt insurable after all, could be a positive development.

06.05 The deadline for acceptance of the offer for bonds governed by international law and for state-guaranteed bonds issued by public companies has been extended to March 23.

06.03 Participation in the bond swap will rise to 95.7pc after Greece triggers Collective Action Clauses on those who did not accept to offer, which will forces investors to take loss of as much as 74pc..

06.02 Greece says ?172bn of bond were tendered in bond swap. Greece says 69pc of non-Greek bond holders participated and the country says it has received tenders for ?152bn under Greek law.

06.00 Breaking ...

The Greek government says 85.8pc of bondholders have accepted bond swap offer

05.59 For a bit of background on the Greek debt swap before we get the results it's worth looking at Louise Armitstead's story, Greece in last ditch scramble to avoid default.

05.58 Good morning and welcome back to our live coverage of the eurozone debt crisis. The main story today will be the Greek debt swap, with news expected soon on how many investors willingly agreed to take a haircut before the 8pm deadline last night. We're expecting preliminary results any minute now, as well as a press conference from Evangelos Venizelos in Athens at 11am GMT.

Debt crisis live: archive

Source: http://telegraph.feedsportal.com/c/32726/f/579300/s/1d4dc847/l/0L0Stelegraph0O0Cfinance0Cdebt0Ecrisis0Elive0C91325960CDebt0Ecrisis0Eand0EGreek0Ebond0Eswap0Eas0Eit0Ehappened0EMarch0E90E20A120Bhtml/story01.htm

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