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–At This Point, Does Not Appear Greek Debt Deal a CDS Credit Event

NEW YORK (MNI) – The following was issued Monday afternoon by
the International Swaps and Derivatives Association:

The International Swaps and Derivatives Association, Inc. (ISDA)
today issued the following statement in order to ensure an accurate
understanding of how credit events are determined for credit default
swaps contracts. Today’s statement is intended to underscore key points
articulated in the Greek Sovereign Debt Q&A, updated on October 31,
which discussed this issue with regards to the Eurozone proposal for
Greek debt. Some media accounts of the information contained in the Q&A
inaccurately described the credit event process.

The determination of whether a credit event occurs under CDS
documentation is made by the relevant ISDA Determinations Committee
(DC), which consists of 10 sell-side and five buy-side firms. ISDA
serves as secretary to, but does not sit on, the DC. A supermajority of
votes (12 of 15 DC members) is required to find that a credit event has
occurred without the decision being subject to external legal review. A
weaker majority decision would be subject to external legal review that
might overturn such a determination.

The DC’s review of a potential credit event comes after a proposal
has been announced and its final terms are publicly available and only
if a market participant requests the DC to take up the matter. Neither
of these has yet occurred with regards to the Greek sovereign debt
situation. No debt issued by the Hellenic Republic has been modified to
date, nor have the formal terms for any such modification under the
Eurozone proposal yet been released. No market participant has yet made
such a request to the DC.

When the DC does review a situation to determine whether a credit
event has occurred, it does so using publicly available information and
according to the terms of the ISDA Credit Derivatives Definitions. The
Definitions specify that for a credit event to occur, a restructuring
must be binding on all holders of a particular bond or loan.

Based on what we know now, it appears from news reports that the
Eurozone proposal involves a voluntary exchange that would not be
binding on all holders. As such, it does not appear to be likely that
the Eurozone proposal will trigger payments under existing CDS
contracts. However, whether or not it does so will be decided by the DC
on the basis of the specific facts, if a request is made to them.

More information on the credit event process and the ISDA
Determinations Committee is available in the Greek Sovereign Debt Q&A at
on the ISDA website and on the Determinations Committee section of
ISDA’s website at http://www2.isda.org/determinations-committees/.

** Market News International New York Newsroom: 212-669-6430 **

[TOPICS: MGX$$$,M$I$$$,M$S$$$,M$X$$$,M$$CR$,MT$$$$]

What could possibly go wrong?

Everything. Disgruntled Greeks could easily vote down the deal, which will require greater austerity…

Lots more volatility has just been injected into the process. Papandreou has proven his ability to get tough votes through the parliament but he has not had to go before the Greek voting public since the crisis intensified.

The PM says he will also ask for a vote of confidence.

The S&P is well off earlier lows and EUR/USD is as well. Markets are in algo-mode a few hours ahead of month-end, with stocks, commodities and currencies following each other in a sort of crocked conga line.

Nothing to see here, move along…

Apparently that’s the ISDA’s story and they are sticking with it.

Though they may spend a period in government hands…No risk though, nothing to see here. Move along.

Temporary nationalization is a sign of robust health, I suppose…

If so, I guess I’d like to be imitated by the WSJ…

ForexLive at 11:35 New York time:

The interventions seem to be little more than targeted bailouts to the exporters, these days. Here we are at the end of the month and the BOJ gooses spot to give the Honda’s and Toyota’s a better level to sell, essentially socializing private losses.

WSJ at 1:15 New York time:

The Japanese government intervened heavily in the currency market, throwing the country’s exporters a lifeline just as many of them are reporting bad earnings and plans to move production overseas.

Today’s conventional wisdom two hours ahead of the big guys, I guess.

LONDON (MNI) – The UK’s third quarter data are expected to show
modest economic growth, boosted by delayed activity from the second
quarter, but fears are growing the economy will contract again in the
final quarter of this year.

Analysts’ median forecast is for growth of 0.4% on both the quarter
and year. National Statistics said the impact of the extra Royal Wedding
Bank Holiday and supply disruptions from the Japanese Tsunami knocked
around 0.5 percentage point off Q2 GDP. With much of this lost output
expected to have been recouped in Q3, a 0.4% outturn would indicate
little, or no, underlying growth.

The Purchasing Managers Indices, a patchy guide to growth in
volatile times, pointed to positive Q3 growth in the service sector.
With any reading above 50 indicating expansion, the September Services
PMI outturn was 52.9, following August’s 51.1.

The CIPS manufacturing data showed the sector rebounding in
September, to 51.1 after a shock contraction in August, with a 49.4
reading.

Markit, which compiles the PMIs, said they were compatible with
0.4% growth in Q3 and some analysts cite them as supportive of their
expectations of modest growth last quarter.

The fourth quarter growth data, however, should be free of the
distortions of the Q2 and Q3 figures, and may well show an economy that
is even shrinking.

“I certainly do think the underlying rate of growth of the economy
is weak now and I wouldn’t be terribly surprised if we were to see
output contract in the fourth quarter,” Bank of England Monetary Policy
Committee member Martin Weale said in a recent Channel 4 interview.

The economy has turned out to be weaker than the MPC believed back
in the summer. In the August Inflation Report, the MPC’s implied
forecast was for Q3 growth of 0.75% on the quarter and just under 1.7%
on the year.

MPC member Adam Posen, who has been persisently downbeat about the
UK’s economic outlook, told the Independent newspaper last week that his
growth forecast was “roughly 0.5% or below for 2011 and 0.5% or above
for 2012″.

That pessimism may be excessive – the average independent forecast
in the Treasury’s latest survey is for 1.0% growth this year.

Nevertheless, the economic recovery, already painfully slow, does
seem to be running out of momentum.

Amit Kara, economist at UBS, is expecting the Q3 data to show 0.5%
growth, but he has cut his forecast for 2012 growth to just 0.7% from
1.5%. The euro zone crisis and financial market volatility are seen
weighing on activity, with UBS predicting a euro area recession in the
first half of 2012.

With the first of the October PMIs due out just ahead of the Q3 GDP
data on Tuesday, with the former out at 0928 GMT and the latter at 0930
GMT, and with Q3 GDP boosted by one off factors, even a relatively
strong number is unlikely to provide much comfort.

–London Newsroom: 0044 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: MABDS$,M$B$$$,M$$BE$]

• Cuts debt by EUR 100 bln (to a still unsustainable 120% of GDP if everything goes according to plan, which nothing ever has in Greece).

Bloomberg headlines.

• Appropriate for Canadian monetary policy to be accommodation for some time
• Canada may need to cool housing market further

DJ: Moody’s says strong CHF creating problems for some exporters. (Just the ones who try and export things…)

• Aaa rating reflects long history of fiscal prudence

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