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Friday
Jan272012

Hopes rise for Greek debt deal

 

Charles Dallara

FRANKFURT (MarketWatch) — Expectations that Greece and private creditors will reach agreement on a plan to cut the nation’s debt load were on the rise Friday as talks were set to continue in Athens.

Hopes were buoyed after Olli Rehn, the European Union’s economic and monetary affairs commissioner, said a deal could be reached soon, possibly by the weekend. He made the remarks at the World Economic Forum in Davos, Switzerland.

Greece has once again dominated headlines surrounding the euro-zone debt crisis as negotiations have dragged on amid fears that even a planned 50% writedown of the debt held by banks and private creditors won’t be enough to put the country’s massive debt pile on a sustainable footing.

Charles Dallara, managing director of the Institute of International Finance, and Jean Lemierre, senior adviser to the chairman of French bank BNP Paribas, were set to meet again with Greek Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos on Friday evening, the Associated Press reported.

Negotiators met Thursday night, where they focused on legal and technical issues “and some progress was realized,” said the Institute of International Finance, a lobbying group representing international banks, in a statement.

Private bond holders agreed last year to accept a 50% writedown in the value of their Greek debt holdings through a bond swap. That is expected to knock as much as 100 billion euros ($131.3 billion) off Greece’s debt load.

But talks have stalled amid disagreement over the average interest rate bondholders should be paid on the bonds they will receive in return for existing debt. Euro-zone finance ministers earlier this week rejected a proposal by bondholders for a 4% coupon rate on the new bonds, pushing instead for a rate nearer 3.5%.

Officials have argued that a lower rate is necessary to ensure Greece meets its target of cutting its debt as a percentage of gross domestic product to 120%, down from 160%, by 2020.

The Financial Times on Friday, citing people familiar with the proposal, reported that Dallara and Lemierre could offer interest rates for new bonds that would translate into bigger losses for bondholders but that could be recouped if Greece returns to strong growth.

Private creditors hold around €206 billion of Greek debt, according to Michala Marcussen, head of global economics at Societe Generale. Assuming a participation rate in the debt swap of 90%, a 50% writedown would cut Greece’s debt by around €90 billion, or 40% of GDP.

All else being equal, each half-percentage-point reduction in the coupon that private investors accept would cut Greek debt by a further 2.5% of GDP, Marcussen said.

In Athens, the General Index GR:GD -2.68%  fell 2.7% on Friday, but the benchmark tracking Greek equities ended the week higher. 

Regarding www.skoptionstrading.com. We are off to a good start with our three positions showing profits of 62%, 26% and 2% on Wednesday, moving higher on Thursday to show profits of 67%, 30% and 6% respectively. 

So on Friday we closed two of these trades, the first gave us a profit of 71.58% and the second gave us a profit of 33.97%.

Its nice to bag a couple of winners before January is out and hopefully this is the start of a winning streak. We do have a number of ideas on the drawing board which we are looking to execute shortly, but only when the risk/reward environment is firmly in our favour.

Please be aware that discussions are taking place regarding an increase in the price for this service for new members, so if you are thinking about joining us, then do it sooner rather later in order to avoid this additional expense.

(These stats are now out of date and will be updated as soon as we can get to them, you just cant get the staff these days!!)

Our model portfolio is up 399.82% since inception

An annualized return of 93.60%

Average return per trade of 36.33%

94 completed trades, 86 closed at a profit

A success rate of 91.48%

Average trade open for 50.61days

  

So, the question is: Are you going to make the decision to join us today?

Also many thanks to those of you who have already joined us and for the very kind words  that you sent us regarding the service so far, we hope that we can continue to put a smile on your faces.

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