Good morning

The headlines:

  1. The deadline for the Greek debt-swap approaches this week. If there is enough private investor support, the CAC (Collective Action Clauses) will not be called into play, which in turn would mean that a potential default event triggering Credit-Default Swaps may be avoided. In all of this, the Luxembourg Prime Minister turned around and told everyone that there is a Plan B if this doesn’t work. The rest of the EU prime ministers have been falling over themselves to express “bafflement” at this Plan B, as well as “no idea” what he’s talking about. Politicians. Link: Debt-Swap Deadline approaches.
  2. Over the weekend, Moody’s cut Greece’s credit rating to the lowest level on its rating scale (C). According to Moody’s, the debt restructuring constitutes a distressed restructuring (as debt-holders are losing so much of their debt), and hence, this is a default. Whilst I see Moody’s point (and I do – it’s an obvious one), I would nitpick to say that a default has been priced into the price of Greek debt for months. These debt-holders suffered their losses then, not now. The current debt-holders are more likely to be profiting off the restructuring, as they bought greek debt when a much bigger default cost was included in the price (hence their eagerness to debt-swap and lock-in a profit). Surely it’s just a default because the Greeks just cannot pay back what they owe? Anyway – minor point. Link: Greece’s Rating Cut.
  3. On Friday, all but two of the EU nations signed a new fiscal pact for budget discipline. I see that Spain has already broken the pact by announcing a fiscal deficit forecast that is higher than permitted. And Ireland is taking this decision to a referendum. My key observation: this seems to be one of the many EU fiscal pacts that have been signed over the last few months. In fact, I am truly confused. It looks like the news sources have been loose with the fact and high on the buzz – these “fiscal pacts” sound much like agreements to agree on an agreement at some point in time over an agreed-upon measure, the specification and enforcement of which are yet to be agreed-upon. The fact that Spain could then announce a higher than permitted fiscal deficit forecast is therefore surprising. And, in fact, probably impossible. Watch this space – I’m sure the mud will clear when everyone is settled. Link: Pact for Budget Discipline.
  4. Myanmar (of Aung San Suu Kyi fame) is apparently moving from a fixed to a managed exchange rate regime. Maybe change really is happening there. The kyat will be managed by the Reserve Bank to keep its value from falling below 800 kyat to the dollar. Link: Myanmar nearing currency float.
  5. Carlos Slim, Mexico’s telecommunications tycoon, has topped the Bloomberg List of Richest People in the world, toppling Bill Gates from the top spot. The article is hugely interesting. Link: Slim tops Gates.
  6. And the African Business News in brief. Link: ABN Briefs. The highlights:
    • Tanzania’s growth is expected to miss government targets this year as the power shortages hamper the rapidly growing mining sector.
    • SA’s total vehicle sales increased by 6.4% year-on-year in January – which is the slowest growth reported in years. 
    • It’s rumoured that Edcon will re-list on the JSE as early as 2013, as a result of having to repay debt-holders by 2014.
That’s all for now.
Have a great week.