Greek Swap Will Raise All Euro-Region Debt Costs, Armstrong Says

Greece’s decision to force losses on some bondholders will drive up borrowing costs for all European nations, according to Armstrong Investment Managers LLP.

“The market will demand a risk premium for all euro-zone bonds, even from Germany, following today’s restructuring,” Patrick Armstrong, a managing partner at the London-based money manager that oversees about $350 million, said today in an e- mailed response to questions. “Over the long-term this will lead to higher borrowing costs for everyone, as a risk-free rate does not exist.”

Greece said today it will achieve a 95.7 percent participation rate in its debt exchange after activating so- called collective action clauses to force losses on investors. The swap is intended to prevent the nation from missing a debt payment by reducing 206 billion euros ($273 billion) of privately held Greek debt by more than 50 percent. It will be the biggest restructuring in history.

Armstrong holds a “small amount” of Greek notes due March 20 and will be forced to participate in the swap by the CACs, he said.

German 10-year yields were little changed at 1.80 percent at 10:42 a.m. London time, after falling to 1.77 percent on March 7, the lowest since Jan. 16. The rate on similar-maturity French bonds fell three basis points to 2.87 percent. Spanish 10-year bond yields were 10 basis points lower at 4.96 percent.

“Euro ministers have repeatedly said Greece is a one off, and private-sector involvement will not happen anywhere else,” Armstrong said. “We believe their rhetoric will prove worthless should the euro-zone economy take a turn for the worse.”

To contact the reporter on this story: Emma Charlton in London at

To contact the editor responsible for this story: Daniel Tilles at

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