New bonds of up to 80% lower value!

Transactions of over half a million were made on Friday by the new EFSF bonds of the Greek state, which will replace the ones that underwent a “haircut". Although the new bonds were entered into the system today and formally began trading, values have already been introduced to the system since Friday when the first new inter-bank transactions took place.

Specifically, there were transactions of approximately 400 million euros in EFSF bonds and about 200 million in Greek government bonds.

All the Greek government bonds have been withdrawn, as verified by the BoG on the list sent to all banks. With the commencement of negotiations, 21 new bonds with different maturities ranging between 11 and 30 years are in the system, valued at around 34 billion. These are fixed rate bonds which have been determined at 2%. Tomorrow, the list should see two more floating-rate bonds added.

However, the prices of the new bonds in the early hours of official trading range at very low levels compared to their nominal value.

The 1-year bond duration with an expiry date on 24/2/202, at 26% to 27% of its nominal value, determines the yield at 19%. The total of the new bonds amounts to 2.7 billion.

However on Friday, a “trial” day with transactions between European and Greek banks, EFSF bonds took on values close to 25% -26% of the nominal value, while the Greek government bonds moved lower, at around 20%-22%.

Finally, the negotiation of all Treasury bills is continuing, which were not included in the debt restructuring.

“Looking ahead, we believe that we retain concerns about the viability of the Greek debt despite the haircut. The danger associated with the implementation of the program remains high, even if the next government remains concentrated on austerity, the continuing shrinking of the economy is threatening to make the target of debt reduction to 120% of the GDP in 2020 too optimistic”, Rabobank analysts state.

The low prices of the new Greek government bonds now received by investors speak the truth about the PSI bonds trade: Greece is not going to pay for new bonds and if there is no result, then the new discussions on the banks under English law will begin, as well as Troika loans.

This blurred image is causing a drop in the ASE and banking stock, which will be affected by historic damage stemming from the bonds exchange program.

Notice by FINMIN

The exchange of bonds worth 177,252,131,542 under Greek law has been completed within the framework of the new debt impairment program, as announced by the Finance Minister.

Approximately 86% of bondholders who held titles under Greek law accepted the offer of the Greek government to exchange their bonds last week, removing the possibility of the country's default.