Markets remain on hold until Wednesday in anticipation of a comprehensive EU bailout plan. Two options on the table, which could both be pursued in tandem, involve insuring the first loss 25% of peripheral sovereign new issuance via the EFSF. Another plan seems to involve setting up a leveraged SPV using private and public sector funds (such as China and the IMF) to buy sovereign bonds in the secondary market and create a firewall to protect peripheral nations in anticipation of a hard Greek default involving a potential 60% haircut. It is likely that such a plan would be provisional in nature and therefore subject to full agreement by parties involved, including rating agencies.
Unlock this article.
The content you are trying to view is exclusive to our subscribers.