Credit-default swaps dealers will hold an auction to settle as much as $3.2 billion of Greek bond insurance triggered by the nation’s debt restructuring.
The auction would be held under the rules of the International Swaps & Derivatives Association and would the amount sellers of protection must pay by setting a recovery price for Greek bonds.
Greek credit-default swaps are being settled after investors were forced to exchange their bonds at a loss in the biggest ever debt restructuring. The auction ends more than two years of speculation over whether the derivatives are viable for insuring sovereign debt after European policy makers sought to prevent payouts on concern they’d worsen the region’s crisis.
“Triggering such swaps might have more positive than negative implications for European government bond markets,” said Ioannis Sokos, a fixed-income strategist at BNP Paribas SA in London.
