Now that Greece has finally completed its high-drama debt swap, you might think the new bonds that holders have gotten to replace their original ones would be worth a lot more on the open market. But no. The new Greek sovereign debt securities are picking up right where their ill-fated predecessors left off – trading at a deep discount.
As The Wall Street Journal reported on Monday – the first day the new bonds officially began trading, “the new series of Greek government bonds were being quoted Monday at around 22-26 cents to a euro, price levels that are normally associated with heavily distressed debt.”
The paper also points out that the Greek debt yield is inverted, with holders of shorter-term debt demanding higher interest rates than those on long-term bonds, an indication that investors see higher near-term risk. That’s not a great way for Greece’s new debt to be perceived.
At the same time that the Greece’s new bonds are starting to trade, the EU finance ministers are said to be preparing an approval of the second bailout of the Greek government. Bloomberg quoted Luxembourg Prime Minister Jean-Claude Juncker as saying “As far as principles are concerned, there is no doubt that the second Greek program will be approved.”
That second-phase bailout program would total 130 billion euros, or $170 billion. As much as Europe’s leaders are trying to put a positive spin on the latest developments, the bond market is getting the last word – as usual.