08.03.2012

By Simon Miller

Greek bonds will once again be allowed as collateral with the European Central Bank it was announced this afternoon.

With hopes of good participation in the debt swap rising, the ECB said that it had acknowledged the activation of the buy back scheme, provided to underpin the quality of marketable debt instruments issued or fully guaranteed by Greece.

"In light of this, the Governing Council has decided that the aforementioned debt instruments will be again accepted as collateral in Eurosystem credit operations, without applying the minimum credit rating threshold for collateral eligibility until further notice," the bank said in a statement.

The swap participation is estimated to be between 53% and 80% but most commentators expect the collective action clauses to be activated on holders-out.

The ECB had suspended the use of Greek bonds for collateral following Standard & Poor’s (S&P) decision to downgrade Greece to an ‘SD’ in the belief that it has entered a selective default last month.