Greek debt rollover plan raises doubts on CDS

Reuters
July 5, 2011

Markets are reassessing the usefulness of sovereign default insurance in light of policymakers' desire to bail out Greece without triggering a payout.

But predictions of a more painful restructuring of Greek debt in the future and the lack of efficient alternative hedges should mean investors are unlikely to turn their back on the $113 billion credit default swap market yet.

"We're not yet impaired and trading at a uselessness discount. But that may change," said William Porter, head of European credit strategy at Credit Suisse.

"If you have a genuine way of really inflicting pain on investors -- which is something we've not seen yet -- with no payment of CDS, then you've got a problem."

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