The ISDA ruled today (Friday) that a default has occurred on Greek debt and that roughly $75 billion of Greek CDS paper with a putative net value of $3.8 billion has been triggered and will now pay out. I’m a bit surprised by this, given how hard they’ve worked to avoid exactly this ruling.
The fact that they made this ruling on a Friday, mid-market-session, hints to me that whatever it was that they were trying to avoid (a counterparty failure, perhaps?) had been worked out and was no longer an issue.
Confirming this take is the fact that the market wiggled a bit when the news was released, but did not gyrate or plummet as if something truly bad had just happened.
Of course, the final ruling will have to be on March 19th, when the CDS paper will be priced at an auction, which is how these contracts are settled. So keep that date on your calendar.
Greek Debt Restructuring Triggers CDS Payouts
March 9, 2012
NEW YORK—Payouts on a net $3.2 billion of insurance-like contracts designed to protect against losses on Greek sovereign debt have been triggered, after the country forced certain private creditors into its debt restructuring who did not want to accept the terms of the deal, a committee of dealers and investors decided Friday.
The request made early Friday to the special committee of the International Swaps and Derivatives Association, which rules on such matters for the credit-default swaps market, was made following Greece’s use of so-called collective-action clauses in its domestic-law bonds.
by former_user 
