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What next Greece? Exit probability and bond implications

To better understand the present, you need to know about the future! A Syriza government? A new programme? Off-track or on track? PSI2? OSI? More elections? And if there is an exit, negotiated or chaotic? We develop a scenario tree, and attach probabilities and bond valuations to no less than 18 “end-games.” We think there is an 18% probability of Greece exiting the Eurozone in the next two years, and that 52 is fair value for the benchmark 2032 GGB. That is 6% below the closing price on January 19th.

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