DiamondMarriage.com Forum » The Big Day

1. tgb201281
   

   offline

   Member

   Feared Bond Swap Met With Shrug
   <p>louis vuitton outlet A bond swap completed last week aimed at protecting the European Central Bank from a restructuring of Greek government debt was widely seen as unsettling euro-zone sovereign-bond markets. So far, though, it hasn't. Last week, the ECB swapped the estimated €45 billion to €50 billion ($59.2 billion to $65.7 billion) face value of bonds—bought in the open market in 2010 and 2011 in a vain effort to quell bond-market turmoil—for bonds of the same face value. The new bonds—unlike the old—won't be subject to any forced restructuring like those held by private bondholders. The risk, analysts said, was that private bond investors would conclude that bonds bought by the ECB will always rank senior to theirs in future restructurings, requiring them to accept deeper losses so a government can cut its debts to manageable levels.</p>
   <p>http://www.louisvuittonoutletjan.com "There is a potentially dangerous precedent being set here," said Nicholas Spiro of Spiro Sovereign Strategy in London. However, prices of other euro-zone government bonds have hardly reacted, indicating "that a Greek restructuring is now perceived as a one-off," he said. Justin Knight, a fixed-income strategist with UBS Investment Research, said the ECB's subordination of private bondholders would develop into a major issue for investors only if the ECB were to resume significant purchases of Spanish and Italian bonds. In these circumstances, the more Spanish and Italian bonds the ECB bought, the more concerned private investors could become over the likely subordination of their claims to the central bank's, he said. Unlike in Greece, where the ECB's purchases were around 25% of face value, Mr. Knight estimates the discounts to face value of the ECB's purchases of Spanish and Italian bonds have been about 5%. </p>
   <p>louis vuitton outlet That means that if the ECB were to forgo profits in any future restructuring for these countries, the contribution to debt reduction would be small. "It's really a secondary issue that only comes into play if and when the ECB needs to step in to make big purchases," he said. Since Mario Draghi took office as ECB president on Nov. 1, the central bank has shifted its focus from supporting stressed government bond markets—it has bought about €220 billion in government bonds under its Securities Market Program—to supporting banks. The ECB has purchased just €250 million in bonds over the past four weeks, as bond markets have calmed. The ECB's purchases under its SMP are likely to be treated separately from bond purchases by national central banks in the euro zone—estimated at about €12 billion—for investment portfolios. These may be tendered in the private debt restructuring, officials said.</p>

   tgb201281

   Posted 2 months ago #

RSS feed for this topic

Reply

You must log in to post.