Ecuador default on debt declared by President Correa

December 12, 2008 by · Leave a Comment
Filed under: Global News 

This is one of many more sovereign debts defaults to be declared.  This debt based fractional reserve system is not sustainable and it will become more and more evident in the long run.  I am currently working with a monetary reform group that has come up with a system of issuing currency that does not involve a debt-backing.  Personally I am working on a system for international gold backed trade only currency and a act to address personal savings in the U.S.  I not only try to call the problems out but work on solutions at the same time.

News:

Ecuador’s sovereign dollar-denominated Global 2012 bond fell more on Friday after President Rafael Correa declared default, saying the government would not pay a $31 million coupon payment on its debt.

Correa’s announcement triggers the country’s second default in less than a decade. He said a debt restructuring plan would be present to bond holders in coming days.

The 2012 bond  were bid 10.25 points lower at 25.313, driving the yield up to 90.643 percent. The bonds were bid down 4.25 points in price prior to the announcement.

Ecuador’s five-year credit default swaps traded with a 50 percent upfront premium ahead of the announcement and had been at that level for some time, traders said. CDS provide investors protection against defaults or credit restructurings.

“Everyone is going to have to re-balance their portfolios on this. The CDS have been at these levels for quite some time meaning there hasn’t been a lot of actual transactions in recent weeks,” said one trader at a German bank in New York.

Source: Reuters

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