Jul 19, 2011

Greece: A Maturity Extension Would Still Provide Massive Debt Relief

Even if the face value of the Greek debt were not reduced, a maturity extension would still provide massive debt relief - on a present-value basis - to Greece as a euro of debt owed 30 years from now is worth much less today than the same euro owed a year from now. Moreover, a maturity extension resolves rollover risk for the coming decades. - in "The Eurozone's last stand"

Related Tickers: Related Tickers: National Bank Of Greece (NBG), Deutsche Bank AG (USA) (NYSE:DB), UBS AG (USA) (NYSE:UBS), Societe Generale SA (EPA:GLE), BNP Paribas SA (Public, EPA:BNP), Credit Agricole SA (EPA:ACA) Deutsche Bank AG (ETR:DBK), Banco Comercial Portugues SA (ELI:BCP)

The advantage of a par bond is that Greece's creditors - banks, insurance companies, and pension funds - would be able and allowed to continue valuing their Greek bonds at 100 cents on the euro, thereby avoiding massive losses on their balance sheets. That, in turn, would sharply contain the risk of financial contagion.