Greece And ISDA

No Credit Event yet.  As expected.

Greece CDS doesn’t seem to be reacting to the news, which makes sense, because most people in the market didn’t think a Credit Event had occurred yet.

I am a bit surprised that ISDA didn’t clarify what would constitute a Credit Event.  Their statement says that these rulings don’t preclude a Credit Event in the future, but so far at least they haven’t clarified what would.

I remain convinced that if CAC’s are used to sweep up holdouts, then there will be a Credit Event, but if the CAC’s aren’t used, then there is only a Credit Event if they don’t pay bonds out at par.

This ruling should ensure that anyone with the basis trade refuses to participate in the PSI, and then we will see whether they use the CAC clause to force them, or capitulate and pay holdouts at par.  Seems hard to believe that they would pay any March 20th bondholders out at par, but very little about what has gone on in Greece is easy to understand, so sure, they will jam an extra 325 million of austerity through, and then could pay out a couple billion to bondholders at par.  That could be the straw that breaks the camel’s back for the Greek people.