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The Greek government has officially announced the beginning of the buyback process of government bonds with a nominal value of 30 billion euro. The Public Debt Management Agency has specified the frameworks of the bond trade and the minimum average price the Greek state offers is 30.2 to 38.1 cents per euro of bond debt. The maximum price is between 32.2 and 40.1 cents per euro debt. The end price is determined separately for the 20 different categories of bonds in accordance with their maturity.

The Agency applies the "Dutch auction procedure" for the buyback process of the debt. It allows the government to collect all the bids submitted by investors in order to be able to determine the end and the most competitive price for the buyback. Under the Dutch model, the highest price offered by investors within the range the government has determined for the various bond categories will be selected. The bids will be accepted until the end of the week and the final date for the settlement of transactions with investors will be 17 December this year.

The goal of the process is for Greece to withdraw from the secondary market half of the government bonds held by private funds, which total 62.5 billion euro. The investors involved in the process will receive from the European Financial Stability Facility (EFSF) six-month bonds in exchange. They have been issued specifically for the process and their value will not exceed 10 billion euro.

The terms of the buyback of part of the debt had a positive impact on the Athens Stock Exchange, which registered an increase of 1.8% at midday. Bank shares rose by 6.3%. The price ranges announced are better than originally expected, which gave a positive boost to financial markets this week.

Meanwhile, Bloomberg reports that the spread of 10-year Greek government bonds fell in the early afternoon to 12.85%. The interest rate on German bonds is 1.37% and 14.22% on the Greek ones. "The market reflected the positive terms of the bond buyback. They are better than the investors expected and provide smaller losses than expected for those involved in the process," Takis Zamanis from the Beta financial house told Imerisia. He has also stated that despite the initial euphoria, moderate optimism should be observed until it becomes clear who will take part in the process and what the results will be.

The publication reports that European leaders hope that the buyback of bonds along with the reduced interest rates on the financial aid will relieve the Greek debt by about 40 billion euro. Local analysts, however, note that even if the process attracts maximum participation, a new 10 billion euro from the loan granted by the EFSF to fund the process will burden the Greek debt.

Greek banks and pension funds find it difficult to make a decision to participate in the buyback of bonds as they are already experiencing a serious shortage of funds in their balance sheets. Buying Greek bonds at the average price of 33.1% of the face value increases the need of banks for recapitalization funds. Since Greece is still a country with a higher capital risk, investors are cautious and it is not clear whether they are ready to support the increase in share capital. Their funding will remain largely in the hands of the state and the Greek Financial Stability Fund, which raises the probability of nationalizing the banks.

Hedge funds are expected to profit the most from the debt buyback. They bought a large amount of Greek government bonds in the spring and summer of this year, when their prices were in the range of 10-15% of their nominal value. According to News247, their profit will be between 2.5 and 3 billion and will exceed 100% of the value of their investments.