by Calculated Risk on 7/04/2011 08:47:00 AM

From the WSJ: S&P: Greece Debt Plan Is a Default

Standard & Poor's Corp. said Monday that a leading proposal for easing repayment terms on Greece's sovereign debt would amount to a default under the ratings firm's criteria ... The European Central Bank has maintained that it won't accept bonds with a default rating as collateral. Hence, averting a selective default rating is crucial to ensure that banks holding Greek bonds aren't shut out from the ECB's liquidity operations for the few days that the country's bonds would be rated selective default.
...
A spokesman for the European Commission said euro-zone governments designing a second bailout for Greece intend to avoid a selective default and expect to have "clarity" on the outlines of the package by the July 11 meeting of finance ministers.

From Bloomberg: EU Rescue Effort May Prompt S&P Default Rating on Greece

“It is our view that each of the two financing options described in the Federation Bancaire Francaise proposal would likely amount to a default,” S&P said in the statement. “But, once either option is implemented, we would assign a new issuer credit rating to Greece after a short time reflecting our forward-looking view of Greece’s sovereign credit risk.”
...
Even if S&P or other rating companies determined that the rollover plan constituted a default, the ruling wouldn’t necessarily trigger credit swaps insuring Greek debt. That decision may be made by the determinations committee of the International Swaps & Derivatives Association.

It appears the euro-zone has some time to figure this out - or for someone to blink. The next meeting is July 11th, but it appears they don't have to have a deal until mid-September.

The yield for Greek 2 year bonds is down to 25.9%, and the 10 year yield is at 16.4%. Portuguese and Irish 10 year yields are at (11.6% for Ireland, 10.9% for Portugal).