This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Greek Default Worries Emerge Again

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Marc Chandler

NEW YORK ( BBH FX Strategy) -- Following the Greek PSI in March, one would have thought Greece would be out of the news until next month's election. However, the risk of another near-term default has increased, putting the nation back in the spotlight.

Investors who hold Greek bonds that are governed by foreign (non-Greek) laws are balking at "voluntary" debt forgiveness.

The bonds governed by foreign law have to be voted on by each individual, and the investors appear to have blocked restructuring in 20 of the 36 cases.

Altogether, there is about $26.8 billion at stake. Of this amount, $15.3 billion appears to have been resolved through debt forgiveness.

That leaves about $11.5 billion as a sticking point. One of those outstanding is a 450 million euro FRN that is due May 15. There is a 30-day grace period for making the payment, according to press reports.

There is some fear that Greece could default on this debt, sending it to a non-Greek court for resolution.

Theoretically, Greece could just pay the full amount, but it does not seem so inclined, which raises questions of equitable treatment of private investors.

Greece could refuse to pay anything, which it appears to have threatened to do, but this also raises questions of equitable treatment.

Greece also could negotiate with these creditors to find a middle ground, but this seems unlikely.

The holders of Greek bonds that are governed under non-Greek law have until April 4 to declare their intent.

Turning to politics, amendments to key spending legislation are expected to be submitted over the next couple of weeks. There is a loophole in the procedural rules that allows amendments to be adopted even if there was no prior cabinet approval.

This injects a greater element of uncertainty, especially ahead of the May 6 election. The latest polls shows the Socialists gaining 4.5 percentage points to 15.5% and New Democracy slipping 2.5 points to 22.5%.

There has been some thought that the current coalition government could be maintained and that technocrat Prime Minister Lucas Papademos would actually stay on, but as vice prime minister, with Antonis Samaras becoming prime minister.

Although this may be the best scenario for investors, the risk is that the public, which is facing even more austerity measures, protests by withdrawing support from the major two parties. A fragmented parliament still seems like the most likely outcome at this juncture.

The new Greek 10-year bond yield rose Monday to 20.55%. It is the fifth consecutive session that yields have risen, and they are at new highs since the new bonds were issued in early March.

In the past five sessions, the yield has risen 50 basis points. The German 10-year yields have fallen 16 basis points. The spread stands at 1,824 basis points, widening by 66 basis points, or 3%, over this period.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 -2.90%
FB $117.52 7.90%
GOOG $691.20 -2.10%
TSLA $247.54 -1.60%
YHOO $36.58 -1.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs