BusinessWeek – Greek sovereign credit-default swaps should be allowed to pay out to support demand for government bonds and ensure the wrong investors aren’t punished, according to hedge fund manager Peter Tchir.
Swaps, which pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to meet debt agreements, will lose value as a hedging tool if they don’t work as intended, Tchir, founder of TF Market Advisors in New York, wrote in a note. That will hurt investors who use swaps to manage risk as well as those who speculate, and force asset sales, he said.
