Greece May Be Close To A Debt-Swap Agreement, Eyes To Track Manufacturing Data

Still, the main focus is on the Greek talks with private sector bondholders waiting to see an agreement regarding the size of losses to be bared by creditors and the interest on the new loans.

After the EU Summit which concluded talks on Monday evening with an agreement on tougher budget rules and speed-up of introduction of the European permanent rescue fund, people are waiting to see the beginning of negotiations with international lenders for the 130-billon-euro second bailout announced in October as there are still concerns Greece may fail to repay as much as 14.5 billion euros of debt maturing on March 20.

A report by Bloomberg on Wednesday said Greece and its creditors may reach an agreement with a loss of 70% for a lower borrowing cost of 3.6% instead of 4.25% on 30-year bills, where, in return, a rebound in Greek growth would make the pay to bondholders higher as a compensation for accepting a loss in net present value terms by an estimated 0.5 to 3 percentage points.

Yesterday, Prime Minister Lucas Papademos said there are ‘some difficulties’ in negotiations yet it is currently showing progress stating that ‘the timeline is tight, but we are absolutely focused on the target of bringing the negotiations to a successful conclusion by the end of the week.’

The EU Summit saw a signing on a fiscal compact by 25 of the 27 member states which makes countries prone to sanctions in case of any breach of budget limits starting from March. Also, European leaders agreed to launch the European Stability Mechanism (ESM) in July this year instead of the same month next year to finance highly indebted nations in the region.

Other discussions tackled key issues such as methods of promoting growth and alleviating unemployment. There is a plan to use 82 billion euros of unspent funds from the EU’s 2007-2013 budget to help in creating new job opportunities, especially for youth. In addition, they talked about methods to enhance structural reforms for the job market and business regulations.

Regarding fundamentals, eyes will track manufacturing data from Switzerland, Germany, euro zone and U.K., following the release of Chinese PMI manufacturing which signaled unexpected expansion of 50.5 last month compared with both forecasts of 49.6 and the prior reading of 50.3.

Thereafter, the euro area will release CPI flash estimate for the year ended January, where expectations are in favor of seeing a drop to 2.7% from 2.8%.

Meanwhile, the euro is showing decline versus the U.S. dollar for a third day amid worries regarding the Greek debt-swap talks. The EUR/USD is currently trading around 1.3050 after opening today’s trades at 1.3083.

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