Market Overview

Euro High as Greek Bond Buyback Begins

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After a week of speculation in the market about the Greek debt buyback structure, the details were announced on Monday. The buyback is crucial to Greece's recovery because the International Monetary Fund (IMF) has claimed they will not release their portion of the country's bailout money until they've reviewed the results of the buyback.

On Monday, European finance ministers met for the fourth time in four weeks and Greek Finance Minister Yannis Stournaras explained how Greece planned to carry out the upcoming buyback. Before the meeting, markets had been uncertain about the country's ability to conduct a successful buyback, nor what the IMF would accept as ‘successful' in order to release the funds.

As details were released, the euro strengthened and pushed to a new six week high. On Tuesday morning, the euro traded at 1.3069.

According to Bloomberg, Greece has offered 10 billion euros to repurchase bonds at a price range that was higher than expected. The news injected hope into the market that the country will be able to cut its ever increasing debt. If the buyback goes as planned, it should reduce Greek debt by about 11 percentage points, more than half of the planned drop.

Optimism that Greece may be moving in the right direction has increased investor sentiment in the eurozone and in turn given the euro a much needed boost. The buyback is setting the stage for a new course of action to fight the financial crisis in Europe, one that focuses less on austerity measures and more on the reduction of debt burden.

After vehemently opposing a Greek debt write off, German Chancellor Angela Merkel may have opened the door to the possibility on Monday. Merkel told reporters that Germany would be willing to reevaluate and consider debt forgiveness should Greece become stable enough to rely on its own revenue.

This marked a huge step in the Greek debt crisis, as German lawmakers have been opposed to debt forgiveness, claiming it would be illegal and unfair to their taxpayers.

Posted-In: German Chancellor Angela Merkel Yannis StournarasNews Commodities Forex Global Markets Best of Benzinga

 

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