What’s the Story? Swapping Debt

by CC March 8, 2012 8:39 am • Commentary

The global rally from yesterday is following through this morning. All signs point to a successful Greek debt swap as investors continue to announce their agreement of the offer.The European Central Bank held interest rates as was expected. Jobless claims rose slightly, to their highest level in 5 weeks. The big domestic economic news comes tomorrow with the release of the monthly jobs report.


Greece moved closer to sealing the biggest sovereign restructuring in history as investors indicated they’ll participate in the nation’s debt swap.

Holders of about 60 percent of the Greek bonds eligible for the deal, including Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers including BNP Paribas (BNP) SA and Commerzbank AG (CBK), have agreed to the offer so far. That brings the total to about 124 billion euros ($163 billion), based on data compiled by Bloomberg from company reports and government statements.

The euro and stocks gained on speculation Greece will reach its participation target by the deadline of 10 p.m. in Athens today. The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent and turn the tide against the debt crisis that has roiled Europe for more than two years.


The European Central Bank held its main interest rate at 1.0 percent on Thursday, pausing to assess signs the euro zone economic outlook is stabilizing and to weigh up potential inflation risks posed by a recent spike in oil prices.

The ECB kept the interest rate on its deposit facility at 0.25 percent and the rate on the marginal lending facility at 1.75 percent.

ECB President Mario Draghi will explain the Governing Council’s decision at a 1330 GMT news conference. The decision was in line with analyst expectations in a Reuters poll.


Jobless claims in the U.S. rose to the highest level in five weeks, climbing by 8,000 to a seasonally adjusted 362,000, the Labor Department said Thursday. Economists surveyed by MarketWatch had estimated claims would rise to 355,000 in the week ended March 3. Claims from two weeks ago were revised up to 354,000 from 351,000. The four-week average of claims, meanwhile, rose by a scant 250 to 355,000.


Stocks to Watch

General Dynamics, Men’s Wearhouse, McDonald’s and Rite-Aid are among the stocks that could see active trading on Thursday.

General Dynamics said Wednesday its board hiked the quarterly dividend by 8.5% to 51 cents a share from 47 cents. The dividend will be paid on May 11 to shareholders of record on April 13.

Men’s Wearhouse said it lost 5 cents a share in the fourth quarter, excluding items, on retail revenue of $508.7 million. Analysts polled by FactSet Research had expected the specialty apparel retailer to post a loss of 13 cents a share on $563.2 million in revenue. The company said it sees 2012 earnings of $2.70 to $2.78 a share, above analysts’ estimates of $2.63 a share.

McDonald’s is expected to report February sales totals.

Rite-Aid is expected to issue same-store sales figures for February.


Overnight Headlines (Links)

China blocks sales of Airbus jets

‘Sterilized’ Bond Buying an Option in Fed Arsenal

U.S. Warns Apple, Publishers

Consumers Ramped Up Borrowing in January

Emerging-Market Engines Falter

Be Careful What You Wish for, Mr. Draghi

Greece Moves Close to Swap

Natural Gas Touches Decade Low

Facebook Beefs Up Its IPO Roster

Pfizer Spurned Novartis Bid for Its Animal-Health Unit

Treasury Launches AIG Stock Sale