Greece involved in a $232.5 billion bond swap

Greece involved in a $232.5 billion bond swap

"The bond swap was good for Greece in that it wiped $138 billion off the country’s $485 billion debt load."

On Monday, the Greek debt crisis saga took a very big turn when the nation carried out the largest debt write-down in history. Greece did a bond swap where it took a majority of its privately-held bonds and traded them in for bonds that were actually half their previous value.

The move was seen as a temporary measure and most analysts do not think that Greece will ever pay back its debts and they also felt that the nation’s debt load is just too heavy. The country’s second international bailout will follow soon after this bond swap that moved a large portion of Greece’s debt from private ownership to public control along with stakes being held by the International Monetary Fund and its Eurozone partners.

The bond swap was good for Greece in that it wiped $138 billion off the country’s $485 billion debt load. Even with politicians tooting the austerity horn due to the upcoming elections, many experts feel that the debt mountain that Greece has accumulated is unmanageable. Investors feel the same way too which is evidenced by how the markets are treating Greek bonds.

Long term bonds that have a maturity anywhere in the range of 11 to 30 years are demanding very high rates from investors such as 13 to 19 percent. With all the doubts and the volatility of Greek bonds, Greece is expected to reduce its debt and has taken measures to do so and some of these steps are budget cuts, removing a lot of public sector entities and other austerity procedures in order to not default on its debts and to prevent a euro zone break-up.