Greek debt holders object to new deal threat

Financial Times
September 28, 2011

Look at the price of Greek government bonds and it is not hard to see why some countries banks and other investors to suffer bigger losses.

Greek 10-year bonds were trading at 40 cents in the euro on Wednesday. The private sector involvement (PSI) deal that some eurozone members are now pushing to renegotiate envisages banks taking losses, or a haircut, of just 21 per cent.

To investors not involved in the deal, a bigger haircut seems fair. “We are talking about the haircuts being more realistic. In the long term that is healthy,” says Shahid Ikram, head of sovereigns at Aviva Investors in London.

But, unsurprisingly, people close to the deal on the bondholder side see things differently. They argue that the existing PSI deal is an essential part of the second €109bn bail-out of Greece and should not be meddled with.

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