Week of October 16, 2011 thru October 22, 2011

Greece Debt Sustainability Report By Official Creditors - 2


PARIS (MNI) - The following is the second part of the new debt sustainability report published Friday by Greece's official lenders and reprinted in UK daily The Telegraph.

"Permanent growth and interest rates shocks can lead to unsustainable debt dynamics:

- Growth. Results can be very sensitive to growth outcomes. Fixing the primary balance, permanently lower growth (-1 percentage point each year) would render debt clearly unsustainable, while higher growth (+1 percentage point each year) would lead debt to fall to just under 130 percent of GDP by 2020.

Greece Debt Sustainability Report By Official Creditors - 1


PARIS (MNI) - Greece's official creditors released a report late Friday indicating that much bigger haircuts on Greek sovrereign bonds will be required to get the country's outstanding debt load down to anything resembling long-term sustainability.

With a haircut of 50%, for example, the Greek public debt ratio would be cut to 120% of GDP by 2020 -- still extremely high -- the report argued. To get it down below 110% by 2020, it would require haircuts of 60% or more on Greek bonds, the report added.

If only the 21% haircut from the July 21 private sector deal were applied, Greece's debt ratio would top out at a whopping 186% of GDP in 2013, and would still be at 152% by the end of 2020.

EU Source: Europe Bank Recap Plan Centers on 9% Tier 1 Ratio


Brussels (MNI) - The bank recapitalization plan decided in principle by European Union finance ministers Saturday requires banks to raise their Tier 1 capital level to 9%, an EU official said.

Reaching that level will require European banks to raise about E100 billion in new capital, the source indicated.

Tier 1 capital is the most basic form of bank capital, consisting mostly of equity and retained reserves.

Ministers have not come to an agreement yet on the level of write-down that banks will be asked take on their Greek sovereign debt holdings, the source said. But he indicated that they are working on a model based on the Greek debt sustainability report issued to Eurozone member states on Friday.

Update: Eurogroup Meeting Saturday On Greek Haircut, Banks


BRUSSELS (MNI) - Eurozone finance ministers will return to the negotiating table Saturday afternoon in an emergency meeting for further talks on a plan to recapitalize European banks and increase the haircut on privately-held Greek sovereign debt, a senior EU official told Market News Int

Eurogroup Emergency Meeting Saturday On Greek Haircut, Banks


BRUSSELS (MNI) - Eurozone finance ministers will return to the negotiating table Saturday afternoon in an emergency meeting for further talks on a plan to recapitalize European banks and increase the haircut on privately-held Greek sovereign debt, a senior EU official told Market News Int

Swedish FinMin Sees "Substantial" Haircut on Greek Debt


BRUSSELS (MNI) - Banks need to write off a "substantial" proportion of their sovereign Greek debt holdings in order to restore credibility to the Eurozone rescue effort, Swedish Finance Minister Anders Borg said Saturday.

EU's Juncker: Must Prove We Can Deliver Comprehensive Answer


BRUSSELS (MNI) - European authorities must demonstrate their ability to forge a comprehensive response to the Eurozone debt crisis if they are to regain the confidence of financial markets, Jean-Claude Juncker, the head of the Eurogroup of Eurozone finance ministers, said Saturday.

Portfolios: PIMCO Strategist Sees Cont Appetite For Short End


CHICAGO (MNI) - The need to manage cash reserves is a part of today's market environment and is fueling demand for exchange-traded fixed-income vehicles at the short end of the curve, said Natalie Zahradnik, an ETF strategist for PIMCO.

TheFXSpot: Mkt Mulls Eurozone Crisis Resolution Ramifications


NEW YORK, Oct. 21 (MNI) - Despite persistent doubts that measures expected to be announced at the upcoming eurozone summit will provide a sustained backstop for risk, there was mild optimism Friday that, at least, a set plan would allay market jitters in the short term.

Fed's Yellen: Wider Spectrum of Maturities Buys Might Be Appr


WASHINGTON (MNI) - Though not of the scope of Gov. Daniel Tarullo's proposal that large-scale MBS purchases by considered, Federal Reserve Vice Chairman Janet Yellen Friday raised the possibility of Fed securities purchases across a "wide spectrum" of maturities, not just the Operation Twist lengthening of maturities.