TOKYO -- Yen-denominated Greek bonds are coming up for redemption, and nonpayment could push credit rating agencies to formally label Greece as in default.
Bonds worth more than 11 billion yen ($89.6 million) are up for redemption July 14. The samurai bonds -- yen-denominated bonds from a non-Japanese borrower -- were issued 20 years ago and bought by Japanese individual and institutional investors including Kyokuto Securities, which said in March that it held nearly 800 million yen in the bonds.
Prices of these yen bonds plummeted after negotiations between Greece and the European Union for financial assistance broke down, and the instruments now fetchabout half their principal on the market.
The total valuation of the bonds is not particularly high, but credit rating agencies could see nonpayment as a failure by Greece to honor its debt obligations. Missed bond payments could push agencies to declare Greece in default, which would send all Greek bonds tumbling further. In that case, "investors may become concerned about nonpayment on Spanish, Portuguese and other southern European bonds, creating turbulence in financial markets," warned Osamu Tanaka, a chief economist at Dai-ichi Life Research Institute.
Greece also will be on the hook for 2 billion euros ($2.21 billion) in other short-term government debt July 10, and a payment of 3.5 billion euros to the European Central Bank is due July 20. Payment dates for short-term bonds and other instruments continue through August and beyond.
Even if Sunday's referendum ends with Greece accepting the bailout proposed by its creditors, the country may be unable to find funds quickly enough to pay its debts. Mizuho Bank, which acts as the agent fo the samurai bond payments, will make an announcement if Greece fails to make its payments.