Today's Major Market Move: Greek Stock Market Declines 2.5% After Debt Swap Agreement

Earlier today it was announced that the European and Greek authorities got the response they were hoping for to the voluntary debt swap agreement. The target for minimum participation was 75% and the actual participation rate came in north of 85%. The good feelings by the European power brokers were short lived however as soon thereafter the ISDA unanimously decided that the swap agreement represented a credit event. More from the WSJ:

Yet Greece's use of new legislation--called a "collective action clause"--which forced unwilling investors to take part in the debt swap, made ISDA's decision a foregone conclusion. In a closely-watched decision, a committee of 15 dealers and investment firm representatives decided that the Hellenic republic's effort to reduce its crushing debt burden constituted a "credit event" that would trigger credit-default swaps.

And despite the reduction of Greece's debt, the country's deep economic contraction is likely to make it more difficult for Athens to reach deficit targets established by international lenders. Unemployment has surpassed 21%, and its total debt exceeds its gross domestic product by a wide margin.

To this writer, the ISDA had no choice but to declare a credit event or otherwise the entire sovereign CDS market would've been called into question. The 100 billion Euro write down on Greek debt represents the largest sovereign default in the history of the planet. That's not just a credit event - it's the mother of all credit events. As a result of the ISDA ruling, Greek, Cypriot (aka Greece II) and Italian equities declined on the day and the Euro weakened against the dollar.  Below is a table of the worst performing benchmark equity indexes for Friday's session.

Click here to go to the live table.

Here we see the decline that took place in the EURUSD:

Click here to go to the live chart.

Although Greece is by no means completely out of the woods yet, the debt reduction most likely will have stabilized their situation for a couple of months at the very least. So now all eyes will move to back to Portugal. There wasn't much of a reaction in Portuguese markets today with Portuguese 5 Year CDS rising slightly (up .2%) and the benchmark Portuguese equity index, the PSI General Index, also gaining some (up .8%). We will now keep a close eye on Portugal, as well as Ireland and Spain, over the upcoming days and weeks.