Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Monday, 20 February 2012

Sovereign CDO: Portuguese Debt

Differing treatment of creditors to Greece sets a precedent despite repeated attempts to portray it as a "special case". This means Eurozone peripheral sovereign debt is no longer pari-passu. The tranching and differing seniorities have been made explicit. The slide below shows who's at risk in Portuguese debt. Depending on the targeted debt/GDP ratio in case of a "voluntary" restructuring, bondholders can expect a 36%-63% haircut on notional (this reduces by 3% in case ECB donates its SMP profits on PGB to charity as it has done in Greece).



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