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Norway Buys Greek Debt As Sovereign Wealth Fund Sees No Default

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http://www.bloomberg.com/news/2010-09-08/norway-buys-greek-debt-as-sovereign-wealth-manager-anticipates-no-default.html

Norway, which has amassed the world’s second-biggest sovereign wealth fund, says Greece won’t default on its debts.

The Nordic nation’s $450 billion Government Pension Fund Global has stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal. Finance Minister Sigbjoern Johnsen says he backs the strategy, which contributed to a 3.4 percent loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas.

“The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.”

Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview. “It is important when you look at the time scope of the fund and the investments that there should be a portion of active management.”

The fund, which manages Norway’s oil and gas wealth, mostly buys securities in proportion to their importance in global indexes. By using its leeway to stray from those benchmarks using so-called active management, the fund has beaten those measures by an annual average of 0.3 percent since 1998.

Yield Compensation

Yngve Slyngstad, who oversaw a record 633 billion-krone ($103 billion) loss in 2008 when he became chief executive officer, revealed the Greek bond holdings in an Aug. 13 interview. “Even though the situation is difficult and will continue to be difficult, you get compensated with regard to the yields you are getting,” he said. Yields on Greek 10-year debt are more than 9.5 percentage points higher than on German bonds, up from a premium of 1.15 points a year ago.

Petros Christodoulou, the head of Greece’s debt management agency, said current prices for the country’s bonds offer a “good opportunity” to “pick up good yields, good paper,” in an interview today with Andrea Catherwood on Bloomberg Television’s The Pulse.

Greece’s Finance Minister George Papaconstantinou said his country’s bonds are no longer “something to fear,” in an interview in Athens yesterday.

Govts moving to try and prop up the system?

Why on earth would they buy Greek bonds or have they been buying and then lodging with the ECB and taking the cash?

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Norway says its long-term perspective will protect it from losses.

"They're in it for the long term", now where have I heard that one before?

Holding a bad investment for a long time does not somehow magically turn it into a good one.

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Govts moving to try and prop up the system?

Why on earth would they buy Greek bonds or have they been buying and then lodging with the ECB and taking the cash?

I'd go with the second option... buying Greek bonds at a big discount from private investors and lodging/flogging them to the ECB at full price.

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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