Greece, which hasnâ€™t had a government for more than a week and whose 10-year debt yields more than 27 percent, decides today whether to pay 436 million euros ($562 million) to bondholders who shunned last monthâ€™s debt swap.
A floating-rate note sold a decade ago by Europeâ€™s most- indebted nation matures today. Repaying the security would disadvantage investors who took losses in the bond exchange and voters facing spending cuts. Reneging on the obligation also would constitute a default, triggering derivatives contracts and clauses requiring the settlement of other unswapped bonds. Meantime, the country has no government to make the choice.
â€œThe political vacuum means itâ€™s very difficult for the interim government to take what are essentially political decisions about burden-sharing,â€ said Myles Bradshaw at Pacific Investment Management Co. in London, manager of the worldâ€™s biggest fixed-income fund. â€œIt would be very difficult for Greece to pay bondholders and then turn around and say theyâ€™re cutting pensions to pay the bonds.â€
Reuters reported today that the bond will be paid, citing an official it didnâ€™t name. Talks between Greeceâ€™s main parties following the May 6 elections failed to reach agreement on forming a coalition, paving the way for a second election next month. Itâ€™s possible no government will be in place until at least July. The Syriza party led by 37 year-old Alexis Tsipras, who favors defaulting and an end to economic austerity, placed second in the elections with 16.8 percent of votes. The group is ahead in current polls.
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