LONDON -(Dow Jones)- Greek debt insurance costs are at a record high Thursday as investors wait nervously for the outcome of the debt-swap deal that expires Thursday evening.
Around 0915 GMT, Greece's five-year credit default swap was one percentage point wider at 77 points upfront, according to data-provider Markit.
Quoting CDS prices upfront is a convention reserved for particularly risky investments.
This means protection against a Greek default costs $7.7 million at inception, plus $100,000 a year, to cover $10 million of debt for five years.
Credit default swaps are derivatives that function like a default insurance contract for debt. If a borrower defaults, sellers compensate buyers.
Despite Greece's record high CDS costs, there is general optimism in the market that the country's debt-swap deal will go through, allowing it to receive its second bailout package from the European Union and International Monetary Fund, worth EUR130 billion, and preventing it from defaulting on its remaining debts.
"The most likely outcome remains that Greece will receive enough acceptances to move ahead with the deal and trigger the second bailout package from the EU. They may have to use CACs [collective action clauses] to ensnare the holdouts, some of whom would be hoping that they do so, but that will be at their option," said Gary Jenkins, analyst at Swordfish Research.
EU leaders will hold a conference call on the outcome of the Greek debt restructuring Friday.
Elsewhere, there was very little movement in other euro-zone CDS spreads. Portugal's CDS was one point tighter at 34 basis points upfront.
Spain's debt insurance costs were slightly lower. Its five-year CDS was two basis points tighter at 400 basis points.
Italy continues to outperform Spain, Italian CDS spreads tightened by one basis points to 368 basis points.
Germany and France CDS spreads both tightened marginally by one basis point, trading at 78 basis points and 181 basis points respectively.
- By Sarka Halas, Dow Jones Newswires; +44 (0) 207 842 9236; Sarka.Halasova@dowjones.com
(END) Dow Jones Newswires
March 08, 2012 04:56 ET (09:56 GMT)
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