Markets reacted positively to details behind Greece’s debt buy- back plan, where Greece will offer a modified Dutch bond auction for an exchange of up to 10 billion euros for EFSF six month notes priced between 32.2 percent and 40.1 percent of face value.
The price range set today to buy back bonds is well above market expectations, and is aimed at attracting sufficient investor interest. The program is paramount to reducing Greece’s ballooning debt by a net 20 billion euros and will help the country avert a disorderly default. It also a requirement in order for Greece’s international lenders (EU-ECB-IMF) to unleash funding Athens needs to avoid running out of cash.
The bond buyback plan has eased investor worries that Greece would not have been able to attract enough bondholders needed to cut the debt to the target set by euro zone finance ministers and the IMF.
The euro jumped to a six-month high against the dollar to $1.3075 during the European trading session as markets were satisfied by the news that the bond buy back price range was well above those agreed on at the Eurogroup meeting in Brussels on November 23.