About half of investors would agree to roll over
About 55 percent of investors in Greek government bonds would probably volunteer to roll over holdings of securities maturing through 2013 to help the nation manage its budget deficit, according to ING Groep NV. If there was a 100 percent take-up of the proposal, Greece would save 15 billion euros in 2011, 33 billion in 2012 and 29 billion in 2013, “which would more than cover the gap being left by not getting back to capital markets,” Padhraic Garvey, head of developed-market debt in Amsterdam, wrote in an e-mailed note yesterday. “In reality, the voluntary take-up would likely be dominated by bank hold-to-maturity portfolios, Greek domestics and the European Central Bank, which would mean a more likely voluntary take-up of about 55 percent.” Greece, the recipient of a 110-billion-euro European Union and International Monetary Fund bailout just over a year ago, faces a potential 30-billion-euro funding gap next year with yields on 10-year bonds at more than 16 percent keeping it shut out of debt markets. Garvey estimates the ECB holds 45 billion of the total 255 billion euros of Greek government bonds, with a similar amount held by domestic investors. About the same is held in banks’ hold-tomaturity portfolios, he said. The top 30 investors in Greek debt, including loans, own 70 percent of the total outstanding, according to Barclays Capital. About 75 billion euros is held by central banks, of which 40 billion is accounted for by the ECB, Barclays said in a research note yesterday. (Bloomberg) don, and Ciaran O’Hagan, head of European rate strategy in Paris, wrote in an investor report yesterday. “This would lead to another wave of rating downgrades of non-core sovereigns.” Any replacement of existing securities with bonds that are given so-called preferred status “may be a trigger for credit default swaps on old Greek government bonds, which European Union policymakers clearly want to avoid,” the analysts wrote.
(Bloomberg) Bloomberg survey showed. All 51 economists forecast the ECB to keep the benchmark rate at 1.25 percent at the Thursday meeting. The Frankfurt-based central bank led by Jean-Claude Trichet may increase borrowing costs by 25 basis points in July, a separate survey showed. “Greek tensions will have only a limited impact on the ECB’s determination to raise rates in July,” said Juergen Michels, chief euro-region economist at Citigroup in London. “The euro area as a whole is doing pretty well, therefore the ECB will have to adjust the benchmark rate. It has to position itself not least to safeguard its credibility.” ECB council members including Italy’s Mario Draghi have signaled they see a need to raise borrowing costs further to fight price pressures even as investors become increasingly concerned that Greece may restructure its debt. (Bloomberg)