Greek Debt: Still Junk, But Less So

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In recognition of all of Greece's achievements in recent months—and possibly to avoid being made to look the fool by hedgefunds and S&P—Fitch has awarded the country a not-so-coveted B-minus sovereign debt rating. Five more upgrades and Greece will be a borderline investment-grade opportunity!

Fitch Ratings upgraded Greece's sovereign credit rating a notch, citing Athens's progress in tackling its budget deficit and rebalancing its economy, along with a reduced risk of a Greek exit from the euro zone….

Fitch cited what it called Greece's clear progress toward cutting its deficit. It also said structural reforms have progressed , the financial system has stabilized, and considerable progress has been made on labor market policies.

Fitch noted, however, that a real economic recovery remained elusive and resistance to structural overhauls was high….

Standard & Poor's in December raised its rating on Greece to B-minus from selective default, amid a strong and clear commitment from members of the euro zone to keep Greece in the common currency bloc. It was the highest rating S&P has given Greece since June 2011.

Fitch Raises Greece's Credit Rating [WSJ]
Funds bet Greece will survive and thrive [FT]
Greece Bulls Charge Into Corporate Bonds [WSJ]

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So Maybe Greek CDS Will Be More Than Fine?

Gaaaaaaaaaaaaaaaah Greece. Okay so all systems appear to be go on the Greek debt exchange, which means its time to decide What This Means, and, I just. Really. Greece. Come on. All I want is to talk about 13D reporting requirements, and now I have to pay attention to Portugal? No. Just no.* Still here is arguably a fun factoid: On Wednesday, Swiss bank UBS AG started quoting a "gray market" in new Greek sovereign bonds ... using as a guide details of the debt swap Greece has put on the table for private investors to accept until Thursday evening. The "bid" price for a batch of future Greek bonds due in 2042, or the highest price the dealer was willing to pay, was around 15 cents on the dollar; the "offer" price, or the most the dealer was willing to sell at, was 17 cents on the dollar, the first person said. ... The prices quoted by UBS imply that losses private creditors to Greece will take are more like 79% of face value, not the original haircut of 70-75% many had expected. Yeah but. If you believe this horrible CDS mechanics stuff that various people including me have been yammering about for weeks - here is the best explanation - that means that if for some reason you had the foresight to be long Greek bonds and hold CDS against them you'd end up with a package worth (1) 21 on the bonds and (2) 83 on the CDS (assuming that the 17 offer for the 2042 bonds represents a real price for the cheapest-to-deliver new bond in the Greek auction) for (3) 104 total which is (4) more than par, so you win this particular game, yay. Which you were at risk of losing - a week ago one of our fearless commenters spotted the longest new bonds at 25ish vs. 24ish for the old-bond-y package, for a total of 99 for the hedged holder - losing 1 point versus par.**