greciaSignificant progress on securing a Greek bond-swap deal and a fresh bailout to the indebted country produced an aggressive short-covering during the US session, as EUR shorts run to the exits realizing this time around headlines carried enough substance to believe the finishing touches to a second bailout deal for Greece were finally underway.

"We are almost there," one euro zone official said. "Unless someone really comes up with an idea to undermine the whole deal, it should be approved on Monday by European finance ministers." Greek New Democracy leader Samaras also commented that while there is no certainty, there is cautious optimism”, Reuters quotes him as saying. “Greece has done what it had to do.”

Furthermore, reports from trustworthy sources from the Greek government also confirmed an additional EUR 325 mln in spending cuts had been agreed between the government and the Eurogroup. Cuts will come from defense, public sector wage cuts and other ministries.

One of the stories of the day helping the risk on rally was the confirmation that the Euro zone central banks will exchange their holdings of Greek government debt for new Greek bonds as part of a second bailout program to help the highly indebted nation, German newspaper Die Welt reports, citing people with knowledge of the matter. 

The bond swap will generate a profit, said the newspaper report, because the ECB and euro zone central banks will receive bonds with a nominal value of around €50 billion, higher than their current holdings, and such profit would be distributed to governments via the national central banks. Governments then have the option to channel funds on to Greece.

The operation should be completed by Monday, and will pave the way for the bond-swap deal between Greece and its private creditors. The ECB and Bundesbank declined to comment on the report, which has not been confirmed.