March 19th, 2012
04:18 PM GMT
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London (CNN) – Investors holding insurance to protect against Greece defaulting on its debts will collect just over $2.5 billion after an auction of the country’s bonds found their value to be 21.5 cents in the euro.

The payout gives relief to those who have long bet the country will be unable to pay its bills. Greece has avoided that outcome for months as it continued to be buffered by loans from the eurozone’s bailout fund and the International Monetary Fund.

A default, triggering payment of the insurance - or credit default swaps - was finally called after the country forced its creditors to take massive cuts in the value of their investments as part of a debt swap.

That so-called “credit event” was therefore tripped by a restructuring of the country’s debt, rather than straight non-payment.

The price was reached after an auction in which the country’s bonds - including new ones held by investors who participated in the debt restructuring - were traded by banks to find a price.

Those holding the credit default swaps will now be paid out 78.5 cents on the euro to close out the contracts.

Market participants said the auction went largely as expected, despite quirks created by the country’s debt restructuring.

One observer said the auction was essentially a “washing up” of the restructuring. One takeaway, he added, was that the “political furore” around credit default swaps - once held up by politicians as a highly destabilizing influence in the financial markets - had died down.



soundoff (11 Responses)
  1. Henk

    What a joke. The people betting Greece would default in the hopes they could make a profit from it are the once that should be jailed together with the Greek officials that lied about actual budgets. Talk about a sickening society.

    March 19, 2012 at 5:24 pm |
  2. PhysicsMan

    "Investors who bet.."

    Yep, that's all we need to know about what state the global economy and modern human society has reached- betting on ridiculous nonsense to make a living and profiting from the losses of whole nations and companies. The global economy has become a global casino and the investors addicted to it will soon realise that it was a mistake to participate in such a fragile and ultimately worthless system.

    Why don't these bankers and traders do something worthwhile instead of sitting behind computer screens with a load of figures representing non-existent money crossing them and their minds? Scientific advancement and, thus, the extensive research of scientific principles, theories, laws, hypotheses and ideas is what has given modern western society it's place of relatively large progress levels to this date- do we seriously want to stagnate this progress by allowing the selfish financial engineers continue with their ignorant and frankly disgusting ways of life and work.

    It all makes me sick- if it wasn't for this ridiculously obsolete monetary system, humanity would be far more advanced than it is today; we'd most likely have a colony on the Moon, a comprehensive understanding of man's effect on the atmosphere, biosphere and planet as a whole and thus a solid, strong solution to climate change etc...

    March 19, 2012 at 8:03 pm |
  3. Ignorance

    @ Henk, why should people be put in jail for seeing that a country has been run in an irresponsible way and protecting themselves by buying CDSs.
    Perhaps then people who pay for insurance should be jailed for expecting bad things to happen. How old are you really? I’m guessing 10, because only a 10 year old would make such a simple-minded statement.

    @ PhysicsMan, you claim to be smart yet you don't even realize that without the invention of money the world wouldn't have progressed at the pace it has gone, it would have moved far slower, people would still be debating whether a cow costs 3 chickens or 4.
    The next step to increase progress was this monetary system of digital money, if you understood any of it in the slightest, you'd know that if we didn't use this system, we'd still be in the industrial revolution days.
    In fact it's thanks to this monetary system that we have the advances we have today, research can be attained faster because funds are transferred faster, money is made faster and is available faster. But I guess you believe scientific research magically comes about without funding.
    Do us all a favor and reject this system for a more archaic one and let's see how long you last.

    Your ignorance is astounding and yet you claim to be educated adults, perhaps you're just children who got a hold of mommy's computer. Please for the love of God, stay in school, you lack so much BASIC knowledge about the world that it’s no surprise your country is in such a poor state.

    March 19, 2012 at 9:15 pm |
  4. PhysicsMan

    @Ignorance

    Spare me the inaccurate and system-loving lecture and also spare me the petty insults and false accusations which have no substantiation or point in a debate.

    1) "You claim to be smart..." I didn't claim that in the entirety of my post, but- and this isn't in a boastful manner- I do consider to have talent and intellect in the fields of mathematics and physics and my qualifications and achievements speak for those- so do not judge somebody by their online profile and certainly do not judge somebody whom you do not know in the slightest.

    2) How can we know what the world would be like with a different type of currency based system (e.g. resource based, credit based, single currency bloc based etc) if it doesn't exist today and had never existed under current technological capabilities and conditions? The answer is we can't, and thus your argument is a strawman one and one which assumes that a variable currency monetary based system is the only viable option in the modern world.

    3) The digital money system was only able to be put in place because of the scientifically minded inventors of digital equipment, computers and the like- therefore, again, your argument is deeply flawed as it seems to be asserting that without a digital money system we would not have digital and other computational technology; the latter came before the former, so your argument is inherently flawed from a logical as well as historical point of view.

    4) Yes, true- but then we return to point 2 and again we can ask the question of "would scientific research funding and resources availability and thus scientific advancement be more plentiful if we had a monetary system different to the current one?". And, again the answer is we don't know because we haven't tried it yet in the modern age under current technological conditions.

    5) "Do us all a favor and reject this system for a more archaic one". You clearly did not understand my points, that comment is irrelevant and petty.

    6) "Perhaps you're just children who got a hold of mommy's computer". Another petty insult for which you have no substantiation and, thus, for which I care not.

    7) "You lack so much basic knowledge about the world...". Quite the contrary actually, and in contrast to what you may think- "the world" is not "the economy" and will never be.

    8) "... that it's no surpiese your country is in such a poor state". Obviously you haven't entertained the fact that the lack of fiscal responsibility and the inane selfishness and foolishness of bankers and politicians alike is why western countries are in such a poor state. Perhaps you haven't heard of the 2008 Great Recession and th debt crises then...

    March 19, 2012 at 9:45 pm |
  5. enkephalin07

    Not montetary systems so much as THIS monetary system specifically. Seeing how much investors have to gain from so much loss makes me wonder if this was all a set-up. Credit default swaps, fine idea! Can they be sold to people who don't even have a stake to secure? If so, then you can sell insurance for the same catastrophe to everyone who believes they can profit from it happening, bringing the price down. And if those are tradeable as any other "financial product", then as disaster looms the price goes up the more it's traded -

    So who besides Greece is going to be left holding the bag? Who inside Greece stands to profit, and do they have their hands right in the government fiscal controls right now?

    March 19, 2012 at 9:48 pm |
  6. Merlin

    The triumph of unrestrained capitalism! This is just the tip of the iceberg.

    March 19, 2012 at 11:17 pm |
  7. chris

    their CDS only provides for the remaining 78.5 cents for the Euro to make it whole? Nothing more?
    that sounds fishy to me.
    it would actually depend on the terms of contract for those CDS', but still, just wonder, if some part of the story is missing...

    March 20, 2012 at 3:13 am |
  8. JCthatsme

    Im with physics guy, ignorance is ignorant

    March 20, 2012 at 6:27 pm |
  9. sameh

    You will not believe what is happening in the stadium during the match
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    March 24, 2012 at 2:15 am |
  10. sameh

    dying lion Very influential position
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    March 25, 2012 at 8:14 am |

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