Oct. 21 (Bloomberg) -- Greek government bond losses for investors in the debt will probably be no more than 50 percent, according to Goldman Sachs Group Inc.
“There will be a deeper haircut on government debt within the existing PSI framework,” Goldman Sachs analysts wrote in a report today. “To meet the requirement that such a debt exchange be voluntary, and therefore avoid a credit event that would trigger credit default swap contracts, the haircut will likely be limited to the 40-50 percent range, rather than the 60 percent plus originally demanded by Germany.
‘‘The resources of the EFSF will be ‘leveraged’ by offering first-loss insurance on new government debt issues by Italy, Spain and possibly other countries. We expect the insurance to cover the first 20-30 percent of principal. After accounting for existing EFSF commitments, this scheme could guarantee up to 1.25 trillion euros of new issuance,’’ the analysts said.
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