Just The Facts, Ma’am.

Well, we are finally getting close to getting some actual facts.

The 9 page IMF report has been leaked.  It doesn’t show much “sustainability” and that is without taking a closer look at the assumptions.  That report talks about a 95% PSI participation rate on an “updated pool”.

While we haven’t seen any details on what the pool is, or what the deal is, I finally saw something that I found very interesting in a Bloomberg article –

“The 32 members of the IIF’s larger creditors’ committee….had a least 44 billion in euros in residual holdings”.

I hope the 44 billion is on a mark to market basis, since then it would be close to 200 billion.  I suspect that the number is actually a notional number, in which case, if accurate, 75% of the holders haven’t agreed to anything.  Facts will be interesting.  I have to assume the March 20th bonds are in the pool, but who knows.  We also don’t know, with what now looks like a hodgepodge of new bonds to be issued by Greece and the EFSF whether each bond gets the same deal, or whether different bonds will be treated differently.

If the ECB and Greece have already done their bond exchange, no one has taken the time to inform the authorities that maintain how much of any bond remains outstanding.  With a complete disregard for the rules, that is just as likely as the possibility that in spite of the headlines last week, they haven’t done the exchange yet.

The ECB has at least temporarily stopped their secondary market purchases.  Part of that is the “success” of the program so far.  Part is also the fact that they were getting towards the upper limit of what they could sterilize, the problems their holdings have created in the Greek workout, and hopes that LTRO is doing its job.  I continue to believe that banks have been using LTRO as a tool to pre-fund debt that is maturing rather than as a way to materially add new risk.  If that is the case, concern that SMP may not be an active tool of the ECB any longer, coupled with a low LTRO amount on February 29th could give the market the chance to put some pressure on yields.   Greece may or may not be contained, but the problems in Spain and Italy haven’t gone away, and Portugal and Ireland must be eyeing a 50% “private sector” debt forgiveness program with envy.

So far, the market is showing early signs of having built-in a lot as Main is actually now weaker post the announcement, after having been slightly tighter earlier in the day.  Maybe details will help the market, but I think the realization that the details aren’t well put together and offer lots of potential difficulties for the banks in their effort to get governments to give Greece money, so that they can get paid, may detract from the “successful” outcome that has been announced.