After seven hours of deliberation, ISDA tonight reached a unanimous decision that the Greek bond swap represented a default, triggering CDS insurance totalling some $3.5bn.

It’s a bit hard to see how you argue uphill and down dale for that amount of time…and them emerge unanimous.

The Dow Jones newswire was reporting earlier this evening that ISDA felt its decision ‘could only be made once CACs are formally activated by Greece’.

Five hours to get to that?

Hmm. I wonder what any Slog reader – road sweeper, rodent capture operative, £18M bonus earner at Barclays, washed-up hack, mother of seven – truly thought the oft-expressed intention today by Greek authorities to activate CACs was likely not to turn into a formal activation. After all, Mr Venizelos was wearing a tie when he said he would force the remaining non-joiners into participation. Perhaps for the purposes of ISDA monitoring, Evangelo should don a dicky-bow and enunciate clearly, “Watch my lips Charles Dallara, I’m going to invoke CACs and force you misirable f**kers into accepting this deal”. Maybe that would do it.

At any rate, back then, it clearly hadn’t done it for Dallara himself. Earlier this afternoon, he told CNBC, “The voluntary, negotiated nature of this deal is notable.” Well hey Charlie, you know what? There’s 25 billion euros of pissed-off investors out there saying their lack of acquiescence is pretty damned notable too, because they got forced into a pen they didn’t wanna be in. And we didn’t even get to the foreign law guys yet.

Later still – what one might call mid-evening – BBC economics bod Mark Broad tweeted thus: ‘Still no announcement from ISDA as they are waiting for an official anno from Greek gov. Source says it could now be tomorrow am’

An official anno, eh? Were we talking anno domini here, or just a ‘no’? It looked like we were going to have to wait. The entire eurozone debt experience has, lets be clear about this, been one long series of waits while a varied collection of stakeholders found acceptable ways to stake their claims.

Time for a puerile parallel….

And there is breaking news coming in….yes, this is a very late flash, from the San Francisco Insurance & All Risks Solid Respectable Company Inc, and yes…it’s a clear statement of their position, dated April 19th 1906:

‘Following yesterday’s muted sub-crust disturbance in the San Francisco zone, the Global Earth Tremor & Live Ongoing Seismograph Translator (GETLOST) has ruled as follows: ‘At 29.6 on the Richter Scale, we can confirm that the resultant earthquake lies well outside our established guidelines of 4.5 – 9.6 in order to trigger a claim for damage. Getlost therefore rules that no applicable seismic event has taken place’.

Anyway, ISDA has at last recognised a credit event when it sees one. And just ten minutes ago at 21.10 GMT, a statement from these near-sighted folks said that they didn’t ‘see significant impact on markets from Greek default’.

Which probably explains why they reached the unanimous verdict they did.


  1. Π₪₪₪₪Π


  2. I think the significant thing is that the annoncement came at 21:10 GMT. ten minmutes after the Dow closed at 21:00 GMT.

    That gives all the players time to shift (and shore-up) their positions before the FTSE opens at 08:00 GMT tomorrow,


  3. “rodent capture operative” you called, sir? =Ö=

    [this is the best i could do for cat’s whiskers, sorry if nobody got this thus far].

    Well, we have the weekend to enjoy this; why did this not happen on a Monday I wonder (do not answer!!). There will be some worried bankers – and some happy ones too?


  4. Just a note on the 21:10GMT – the Dow Futures fiddled a bit and moved a touch higher (well they did with my MMaker). The Aussie market will be the first to be hit if there is a strong reaction. They’ll use it to hedge before the FTSE opens.


  5. @Andy
    you are right about the Dow – when I saw the timings on Zerohedge it sort of added up! I have to ask this: are these guys serious about trusting the markets??? Then they go and spit on them like this?

    what about the Nikkei and HK markets? 8 hours previous to London?


  6. Plus – I see that an Austrian bank is in trouble because of the default. Probably a small one – but just the beginning for EUZone banks?


  7. Have you read the BBC take on this? What planet is the BBC on?
    In my personal experience they only use what they have been able to pick up from other sources but this goes beyond the bounds.


  8. Re the Beeb: If you want everything to be fine, there is nothing to stop you saying that everything is fine. As for the truth, well the Beeb has been rather selective on that for quite some while.


  9. Just watching the midnight news on Crete TV, not a mention of CDS or default. The poor greek people are too busy worrying about pay cuts, pension cuts, unemployment, homelessness, availability of medicines, increasing crime. Looking at a piece now about what I can only describe as “tree rustling” – rising fuel prices and falling income is causing the theft of trees for fuel. For the greek visitors here, η καρδιά μου πονέι για σας. The northern european governments should be ashamed. Δροπή !


  10. After seven hours of deliberation, ISDA tonight reached a unanimous decision that the Greek bond swap represented a default, triggering CDS insurance totalling some $3.5bn.

    Is this $3.5bn all the money that is going to change hands? Does this total include all the side bets?


  11. @Bill
    given that nobody knows how many side-bets (=derivatives) have been printed, nobody can say. For one thing, most if not all will have been off the books and not dealt on open markets let alone marked. As I proposed this afternoon, there is a good chance that many were automated using pdfs, secure lines and electronic signatures.


  12. Correction, Crete TV had 30 seconds of bailout ripped off EuroNews, right at the end of the bulletin.

    I wish I could take all the decision makers to a greek houshold to see the damage they’re causing to society, damage which will take many years to repair.


  13. Isn’t this the March 23rd plot – the story you broke a few weeks ago? I recall you saying at the time that the Friday afternoon timing of it would be strategic for the banksters, and didn’t you say that, the plot having been revealed, they might reschedule the event?


  14. Pretty hard to do that – the repayments are due when they’re due.

    March 23rd is the next date a decent-sized bill is due to drop on the mat.


  15. Pingback: John Ward – ISDA GREEK BOND JUDGEMENT : UNANIMOUS (?) – GREEK DEFAULT – 9 March 2012 | Lucas 2012 Infos

  16. Thanks for the answer “Real Gemz” It always amazes me how almost every news source that has a story about the 3BN CDSs always put something like “manageable” in the story referring to the small amount of CDS exposure.

    Time will tell how manageable this credit event will be.


  17. Is there any chance…. or even a slight chance that you could drop using the f word in your posts? It has become fashionable to use bad language in English, but this does not excuse the use of bad language. Use of language in such an open forum degrades the post, reflects badly upon the person making the post and implies a limited level of intellect of the reader.
    You are better than this, you are of an age when I may suggest you remember that such language was used mainly in private. In the dumbed down society that is the UK is there no level at which debasement ends?
    I am not a puritan, I’m one of the few who can swear at will and not be arrested as in English law a sailor or ex sailor is permitted to use bad language, but I have a level of intelligence above the mediocrity of the classless society that is the UK.
    I am continually dismayed by the lack of self control and articulation of many authors, I do sincerely hope to create impact in your posts you can find the words to adequately describe something with out reverting to foul language.
    This is something that has for some considerable time concerned me. In light of your recent posts I do believe you dishonour yourself and your fellow sloggers with such pronunciations.


  18. I really hate it when people post long winded pompous judgemental nonsense trying to pass themselves off as some kind of morally superior being.


  19. The “f” word is rarely used on this blog by either JW or the comment community. I read somewhere perhaps JW “about” section that he would ban anyone who swears more than one time in the comments. Perhaps he is not so stringent about this rule as he once intended to be, but you are unbearably sanctimonious. I suggest you go somewhere else, if you don’t like it here. Otherwise, shut up.


  20. Interesting story on DMN –

    “Hedge funds buy mysterious railroad bonds

    New Greeks bonds discovered: Suddenly, another 30 billion euros of risk

    Hedge funds have been buying Greek bonds at a high tempo that are explicitly not allowed to be rescheduled with force. When these bonds issued by the Hellenic Railways need to be fully paid out, the chances for bonds issued under foreign law will increase.

    DMN | Posted: 9:03:12, 11:18 | Last updated: 09:03:12, 21:22

    The first part of the debt reduction has been hailed as a success by the financial markets. 85.8 percent of private creditors have allegedly accepted a voluntary debt reduction.

    But with that the subject of Greek bankruptcy is not yet off the stove. Indeed, there are special bonds which cannot legally be forced to undergo a rescheduling. Hedge funds are now buying up these bonds to compel Greece to payment. With 412 million the value is comparatively low, but it could be more than 33 billion euros very quickly.

    In between times new bonds have surfaced that could bring the Greek government into difficulties. Some hedge funds have discovered a legal loophole. This could enable them to force Greece to pay a portion of its debt in full after all.

    “What makes me really angry is that some of them might fix it to be paid out in the end, in small quantities it is still possible,” someone intrusted with the matter told Reuters.

    The loophole applies to bonds issued by the state-owned Hellenic Railways and guaranteed by the Greek government. These bonds, issued for the amount of € 412.5 million and due to mature in 2013, have a special clause. This allows the creditors to argue that Greece is bankrupt if the country tries to refinance them or modify the terms for them, reports Reuters.

    Then the collective action clauses, which Greece is now expected to seek (here), because it did not result in a 90-percent approval, would not apply for these bonds. Thus the hedge funds are trying to buy up enough of these special bonds to avoid being forced to accept the debt reduction. With this they could put pressure on Greece to pay the debt in full: 412 million euros – if all of the bonds are bought. A small amount, but with great consequences.

    If the Greek government refuses, that could trigger similar provisions in other railway bonds – in this case Athens would get a bill of around 3 billion euros. And one from investors who would demand immediate repayment, according to one of the sources. Interesting in this case is that the bonds were not issued under Greek law. These account for about 15 percent of the 206 billion Greek bonds. Here again, there are hedge funds who are additionally trying to buy up such bonds.

    Questionable is namely, whether Greece can force a debt waiver on the creditors whose bonds are subject to foreign laws. A forced payout for the railway bonds could increase the likelihood that the current bonds, subject to UK law, would also have to be paid out. According to Reuters, they have a volume of 8 to 9 billion euros. As a consequence, further bonds subject to foreign laws may also be affected. Overall, the value of bonds not subject to Greek law amounts to around 30 billion euros.

    Where Greece would get the money to pay out on these bonds, if it cannot force a rescheduling on them, is also unclear. According to the Reuters sources, the hedge funds could have already started to buy up these railroad bonds, and other bonds that are not subject to Greek law, in large quantities. For Greece this would result in payments of more than 33 billion euros.

    And although initially only these special railway bonds and the bonds that are subject to foreign law have a chance of pay out, this could also have implications on the whole total debt reduction. If, for example, for the railway bonds it is argued that Greece is bankrupt – because it attempted a restructuring or a forced rescheduling – this legal situation could retroactively change the terms for the debt reduction carried out so far. Which in turn could lead other creditors to consider legal action.”

    Plus, some spicey comments – these are for you, BT:
    “Well, take a lookee here! A rogue is he who thinks it not bad! Aaaalso: Goldman Sachs rides the Greeks into the EU. With lies and deception. And then, when things get hot, the government is replaced as fast as possible. In Greece, Italy, Spain and Portugal, and at the top of the ECB, Goldman Sachs money-technocrats are now in charge. Who wants to bet that Sarkozy will also make it to such a place? Even the cash cow Switzerland has, through the IMF and the binding of the Franc to the euro, tied itself to the EU more than it really wanted, and will therefore go down with the good ship Euro. Well, fancy that, even there the SNB-Boss has been replaced by a Goldman Sachs technocrat. And so we will live to see how the banks take over the rest of the governments and, with that, even do some huge business. The common serfs must bleed, the tax-paying Michel, so that at some time the banks can be among themselves, and just pust the banknotes back and forth. The network which is needed to decimate the world population is also almost finished. Every 70 years or so the economy collapses, this is followed by war and then reconstruction, also financially. That’s the way it’s been for centuries. It won’t be long before we have the third world war, and if it is a nuclear war, then it probably be the last.”
    “Just one example: In 2007 the state railway had a turnover of 110 million euro. The loss was around 800 million euros. How does that work? The personnel costs alone amount to almost 500 million €. A train driver earns, with “fictitious overtime,” which are bonuses, about 100 000 € per year.
    Should I really apply there for a job as a train driver?”
    “No Margrit, I don’t see it so extreme. There will be no civil wars.
    But they will come. With certainty. They will begin in the beautiful cities of Paris, Brussels, Cologne, Berlin, Frankfurt, Lisbon, Madrid and Barcelona, Amsterdam and Londonistan. Because, if the people no longer get their bread and circuses, they will be a little less relaxed, when forced mortgages are written for them in the land register, which they cannot pay, and when all of a sudden benefits, Hartz IV and pensions are no longer credited, instead food stamps must be collected, then things will start to burn.”

    It’s really marvellous how the last guy knows the new name for Londinium!


  21. Ye Gods! Sum muvvas do ‘ave ’em.

    “…I’m one of the few who can swear at will and not be arrested as in English law a sailor or ex sailor is permitted to use bad language,…”

    Just for interest, does this also apply to the common soldiery, respectively ex-common soldiery? It would be nice to know, so that I can prepare an adequate defence for if I might ever be summoned to court for telling the bailiff/taxman/jobsworth where to go and what to do when he gets there. Fornicate sounds so stilted, don’t you think, even with its f to kick off with?

    The occasional use of a profanity is akin to the use of a dab of red in certain of Boris Vallejo’s darker portrait. If you are not familiar with his work, Google is your friend. But beware, his paintings tend to be rather risque. Or, in good old-fashioned English, saucy. I am assured however, by one of his former students, that his models kept their knickers and bras on.


  22. Interesting Viking Jack!

    I saw a Reuters headline that Goldman has found a second home in Salt Lake City, Utah. Odd that, or not?


  23. For bonds to be purchased they normally have a sea of derivatives written on them,just for insurance you see,so a no credit event would have made the selling of bonds impossible-just a thought.


  24. @reflectiveraw

    Quite right too… I’ve told John time and again about swearing on this site, but will he f*****g listen? Will he bollocks.

    There are times, especially with regard to the pompous fools who are dragging us ever nearer to Armageddon, when nothing but the f-word will do. I admire John’s restraint thus far.


  25. Im confused by this 3.5 billion total payout on CDS, didnt the Germans take out $7 billion to cover their Greek bonds exposure alone?


  26. “Is there any chance…. or even a slight chance that you could drop using the f word in your posts?”
    In John’s case – probably 85.8% – no.


  27. And one or two Greek governments as well! Greece itself has much to think about at the moment, especially its terrible political and financial management of the last decade or so. I hope not all Greeks blame the northern countries for their self-imposed disaster. The UK is outside this malign loop, but that does not exempt us from serious consequences as we have done the same sorts of thing but without the backstop of Germany. I’m putting a lock on my log store, no tree rustling here – yet!


  28. I wish we could get the Greeks to understand that it’s their political and financial system, or rather the lack of one, that has caused this problem, coupled with a total failure of the whole country to understand the major implications of entering a fixed rate currency board. Even now Greece still wants to be in the EZ straight jacket (presumably for the juicy grants) but still seems to be failing to understand the direct consequences. In short, there is no free lunch, you have to work to get the benefits of EZ membership, they don’t just appear on a plate when a treaty is signed. Unless Greece can get someone else to pay (Germany is clearly not keen and I understand that), then some radical changes will be needed in Greece. Plus quite a few other places in the southern EZ. Still, the first large slice of debt has been written off (at the expense of others as well as Greeks, please note) and I expect the Greek people will be queueing up to thank us for that. It’s quite a sizeable amount per person.


  29. @Bill

    if Bankrupt Taxpayer is correct, the CDSs that are triggered will only be for the parties who did not take part in the agreement – astonishing!

    This would mean that only the derivatives of those CDSs would be triggered (= far less dangerous).

    But the real danger now is that Portugal will not be treated so kindly in this circumstance! How will you persuade people to take a voluntary haircut on their Portuguese holdings when they have CDS protection?


  30. @Phil

    apparently only those CDSs covering the parties who did not take part in the voluntary agreement will be triggered.

    In other words, those who accepted a voluntary haircut have been royally shafted.

    Even with only a tiny proportion of the CDSs triggered the fallout from the derivatives sector could still be extremely damaging. Quite how damaging is unlikely to be known until they have all been unearthed. With electronic trading of such things in a wholly unregulated-unrecorded system that is completely off balance sheet (= illegal?) the numbers are simply unknown.

    I doubt that the players kept proper records of their transactions. As to the transactions that were developed automatically using pdf technology/email/electronic signatures … my guess is that they are a little like the super-fast trading with minute profits that make nice bonusses when there are sufficient numbers of them. Of course, they would **never** be paid out on. Would they?? … !

    Remember that the maximum size of an Excel spreadsheet is 2GB. A couple of them and you have quite a few derivatives recorded. There will be some worried bankers this weekend going through the highlighted ones … if indeed they had the sense to keep records …


  31. @VJ: Hi! The railway bonds look like a new Act in the Greek Drama.
    I’m not a financial lawyer…but I’m not convinced that whatever happens on that front will materially affect the bond-swap of yesterday. A large majority of holders voluntarily (allegedly) agreed to swap their bonds and take a loss. Those who held out and had CDS insurance will be covered by the ISDA declaration of ‘Default’ late yesterday. I can’t see what would be achieved by reopening the bond swap deal.

    On Goldman juice…I find myself with mixed views on this. On the one hand, the technocrat appointees in Italy, Greece and elsewhere are totally outside of any democratic process and I wouldn’t choose GS to supply them anyway ( Mises experts would be better in my mind).
    OTOH, it should be abundantly clear to voters in all these countries that the elected politicians (including PMs) are mostly innumerate and simply do not understand the first thing about managing money and economics, especially at a national budget level. Ditto their cohorts who get elected and appointed as finance ministers etc. Add to that the prevalence of Keynesian economics in Western thinking for several generations and it’s not difficult to see how we got into this mess. IMV Keynesianism as an economic philosophy doesn’t work, it’s just a socialist palliative.

    I don’t know the solution to all this but it’s certainly needing of debate.
    A good place to start in Britain is for us to introduce a proper written constitution which limits the powers of any elected govt. Mr Brown would not have had the authority to throw £billions of taxpayers money at the banks when his credit bubble burst. And he would not have been able to run a CPI scam and low interest rate policy in the first place to create his bubble.


  32. Yes, Gemz’s quote of me is correct. It’s based upon my view that ISDA will not pay out to bondholders who voluntarily agreed to do a bond-swap.
    ISDA’s declaration of Default was specifically based upon Greece invoking a CAC to impose the swap on all remaining bondholders. And that only applied to these who held out. My interpretation of this explains why the quoted pay out figure of $3.2b-$3.5b is quite low.


  33. In the sheer volume of JW’s daily output, his cry from the heart that we’ve got to take individual responsibility for changing things is slipping down the list.
    The quality of thoughtful responses on this blog, and the relative lack of ranting, suggests that there is a core of people capable of having a dialogue with the world on who we really are, and how we can move things forward.
    Conversations everywhere tend to focus on numbers because the world seems to be run by accountants these days. But numbers are on the bottom of a scale that goes data -> information -> knowledge -> wisdom. We need to get to Wisdom.


  34. It’s good to see this news – and the fact that the “bailout” puts Greece in more debt than it started with – taking prominence on the BBC website (for example)


  35. Pingback: What a mahvelous turn of phrase « Clueless Numpty Review

  36. Why would anyone with CDS agree to a VOLUNTARY exchange?

    Where’s the upside in that?

    Can only hurt, can’t help.


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