Greek Bonds
January 30, 2012 8:40 AM Subscribe
Greek Bonds: 30.03.12 They have a nominal value of 1000 euros but trade at 39 euros? How does buying bonds work, and why cant I buy just one for 39 euros?
Based on looking these up on Bloomberg, I think the nominal value would be 100 euros (but sold in 1000 euro blocks).
The reason that they're trading at 39 in the secondary market is because Greece is trying to negotiate a voluntary debt exchange with its bondholders, whereby those bondholders would lose between 50 and 70% of the value of the bonds. If that deal isn't agreed, then Greece is going to default on its debt. So the 39 euros represents the market's view of the likely actual value of those bonds. [I'm sure someone can give a better explanation of this than me, but that's the basics].
posted by Infinite Jest at 8:48 AM on January 30, 2012 [2 favorites]
The reason that they're trading at 39 in the secondary market is because Greece is trying to negotiate a voluntary debt exchange with its bondholders, whereby those bondholders would lose between 50 and 70% of the value of the bonds. If that deal isn't agreed, then Greece is going to default on its debt. So the 39 euros represents the market's view of the likely actual value of those bonds. [I'm sure someone can give a better explanation of this than me, but that's the basics].
posted by Infinite Jest at 8:48 AM on January 30, 2012 [2 favorites]
Response by poster: Thanks a bunch, my problem was that I couldn't find anything stating that there was a minimum and that they have to be bought in blocks. Where can you see that?
posted by freddymetz at 8:52 AM on January 30, 2012
posted by freddymetz at 8:52 AM on January 30, 2012
As suggested by devnull's link, the price reflects the fact that the market considers it is highly unlikely that the Greek government will be able to pay the bond when it matures.
Right now, even with the EU bailout, Greece is unable to even pay the coupons (ie. the interest) on the bonds it has already issued.
posted by TheOtherGuy at 8:53 AM on January 30, 2012
Right now, even with the EU bailout, Greece is unable to even pay the coupons (ie. the interest) on the bonds it has already issued.
posted by TheOtherGuy at 8:53 AM on January 30, 2012
Bonds, in general, trade in blocks - 50, 100, 1000... Even in odd lots, there isn't going to be anyone out there that wants to buy or sell a single bond - there is no market for it.
posted by rich at 8:59 AM on January 30, 2012
posted by rich at 8:59 AM on January 30, 2012
Thanks a bunch, my problem was that I couldn't find anything stating that there was a minimum and that they have to be bought in blocks. Where can you see that?
I'm at work and I looked it up on our Bloomberg terminal - I couldn't see it on the page you linked to, but see rich's explanation. And yeah, devnull's link is very good. Just to expand on that: they need a further loan from the EU/IMF, which won't be released until they agree on the private sector debt restructuring. If they don't get that loan, they can't pay off these bonds.
posted by Infinite Jest at 9:02 AM on January 30, 2012 [1 favorite]
I'm at work and I looked it up on our Bloomberg terminal - I couldn't see it on the page you linked to, but see rich's explanation. And yeah, devnull's link is very good. Just to expand on that: they need a further loan from the EU/IMF, which won't be released until they agree on the private sector debt restructuring. If they don't get that loan, they can't pay off these bonds.
posted by Infinite Jest at 9:02 AM on January 30, 2012 [1 favorite]
This thread is closed to new comments.
posted by devnull at 8:45 AM on January 30, 2012 [1 favorite]