Portugal

Portugal equalled its largest ever benchmark size with a visit to the 10 year part of the curve on Thursday, taking the week’s overall sovereign euro issuance to a record high.

Portugal equalled its largest ever benchmark size with a visit to the 10 year part of the curve on Thursday, taking the week’s overall sovereign euro issuance to a record high.

ISDA, entering new territory, has asked members to help it put together an external review panel to resolve its deadlock over whether or not Novo Banco has triggered a credit event.

Portugal is limbering up for its first benchmark of the year in a week heavy with eurozone periphery sovereign issuance, including an auction where Italy’s three year yield nearly dipped below zero.

ISDA’s EMEA Determinations Committee has referred Novo Banco credit default swaps to an external review, after failing to achieve a “supermajority” with its binding vote on whether the Portuguese bank has triggered a government intervention credit event.

The International Swaps and Derivatives Association (ISDA) pledged to tighten up the standards that govern its Credit Derivatives Determinations Committee, a welcome move at a time when the committee’s role is evolving and it is assuming greater importance as a quasi-legal authority.

ISDA has extended until Friday its deadline to rule on whether Novo Banco has triggered a credit or succession event, after a fourth successive day of grappling with these questions failed to achieve an answer.

The fate of credit default swaps referencing Novo Banco still hung in the balance on Friday, with ISDA’s Determinations Committee unable to decide after three days of wrangling whether the Portuguese bank had triggered a government intervention credit event or a succession event.

The principle of pari-passu among bondholders lies dead and buried. The Bank of Portugal’s decision to select only five of Novo Banco’s 52 senior bonds for bail-in last week has established a new precedent for bank resolutions, and what a fine mess it has created.

Back in August 2014, I wrote a note that highlighted how the restructuring of Banco Espirito Santo (BES) exposed flaws in the 2003 ISDA credit default swap definitions, flaws that should be remedied by the new definitions introduced later that year.

The Bank of Portugal ripped up the resolution rule book for its controversial bail-in of five Novo Banco senior bonds last week, throwing uncertainty on future resolutions and leaving investors to reassess their relationship with Portuguese bank debt, Tyler Davies reports.

ISDA’s Determinations Committee has decided to hold a second day of discussions on Novo Banco, after failing to reach agreement on Wednesday over whether the Portuguese bank has triggered a government intervention credit event or a succession event.