ECB Special Status Threatens Bond Backlash: Euro Credit

The European Central Bank’s willingness to ride roughshod over bondholder rights risks pushing up borrowing costs for indebted governments by making investors less willing to lend.

The ECB swapped about 50 billion euros ($67 billion) of Greek bonds for new securities, identical to the old ones in every way save for identification numbers. The switch makes the ECB senior to other investors, exempting it from the largest sovereign restructuring in history as Greece rewrites the terms of its notes to ensure lenders forgive 53.5 percent of the debt. The European Investment Bank is getting a similar exemption, two regional officials familiar with the matter said.