Risk Off

As Thursday nears the markets are getting jittery, the latest rumor from the sewing circle that is the EU is that the Greek PSI will not reach 75% and may be delayed, the Greek government denies any delays in the PSI offer deadline. Rumors are the PSI take up will come in below 70%, which is below the 75% needed to effect the debt swap and get their next bailout. An increasingly large blocking stake is being built, first by hedge funds that bought the Greek bonds (mostly the UK law ones with better bond holder protections)  and now Bloomberg reports:

Greece’s Swiss-Franc Bondholders Form Group Battling for Rights

March 6 (Bloomberg) -- Investors in Greece’s Swiss franc bonds have formed a group to fight for their rights as the country seeks to pare about 106 billion euros ($139 billion) of debt as part of an international bailout.

The group is concerned by the terms of the restructuring and is “exploring means to address its concerns and to protect the rights of holders of the bonds,” according to a statement from their legal adviser Bingham McCutchen LLP in New York. The group holds the 650 million Swiss francs ($708 million) of 2.125 percent notes due 2013.

This Bingham would be the same firm that is organizing the hedge funds to form a blocking stake, the idea being they will challenge the retroactive collective action clauses and any debt swap in courts outside of Greece and try to recover full par on bonds they may have bought at a discount of 50% or more, a major pay day for the hedge funds!

Meanwhile, banks are doing as we talked about last night and getting money out of the financial system and in too the safe harbor of the ECB deposit facility as it set yet another record for deposits overnight at $827 billion Euros and Euro-zone GDP data released today showed contraction in Q4 2011, re-igniting fears of another recession in the EU.

Furthermore the Czech banking system is now in crisis!