A little over a week ago in Could’ve Been a Greek Tragedy I announced that Credit Default Swaps (insurance) on Greek debt would be triggered, indemnifying the insureds the amount of the hit they’d take when Greece reneges… Three days later I regrettably followed up with A Greek Tragedy After All… The committee charged with determining whether a triggering event had occurred voted nay… Leaving swap-buyers holding the proverbial bag… I did add that the committee “could come back later and reverse that decision”…
I’m pleased to report that, as a result of today’s events, they have indeed come back and reversed their decision… To get the bond exchange deal done, Greece had to enforce so-called Collective Action Clauses on the hold-outs (creditors who wouldn’t volunteer to take massive haircuts)…Which turned out to be the triggering event…
The market gave back a modest gain on the news… Clearly this wasn’t the disaster some had predicted…
This Is A Good Thing!!