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As the news ticker everywhere s squawking right now, the investors’ deal post being past, the borrowers will deign the securities to be eexchanged at a rate less than 3.5% to ensure Greek debt to GDP ratio can indeed decrease. The first sovereign default should blur seemingly the lines between ‘Secured’ and other debt.
The debt default’s negative perceptions have been taken care of with word of the 90% collateralised CDO default ensuring that the remaining $370mln is hardly an issue with CDO nominals at an all time low of $3.7 bln, all the traders having settled till here.
The CDO market was at a highest of just $40 bln in the European sovereigns in play though till the second default is identified as key, most CDS nominals volumes would probably grow 10-20 times the current outstanding at much lower spreads..
Meanwhile Italy is one domino that is unlikely to fall, the U derating likely to be stretched out again so it is not material and the Portugal default pain localised.
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