by Calculated Risk on 7/21/2011 12:15:00 PM

The details are sketchy - it appears the EFSF will have new powers, terms will be extended for Greece, Portugal and Ireland at lower rates - and "selective default" for Greece will be allowed.

The announcement will be later today.

From the NY Times: Greek Rescue Plan May Allow for Default on Some Debt

According to the draft declaration, euro zone leaders gathered in Brussels are set to agree on a series of measures to lighten the burden on Greece, Ireland and Portugal ... the euro zone leaders were also being asked to give wide-ranging new powers to the region’s bailout fund, the European Financial Stability Facility, by allowing it to buy government bonds on the secondary market and to help recapitalize banks where necessary.
...
According to the draft, the maturity of European loans to Greece would be extended from the current 7.5 years to a minimum of 15 years and at interest rates of around 3.5 percent.

Similar help through reduced borrowing costs would be extended to Portugal and Ireland.

From the WSJ: Euro Zone Moves Toward Greek Deal

Some of the options to ease Greece's debt to bondholders would probably cause losses to banks and others, and trigger a temporary assessment of default against Greece by credit-rating agencies.

Finance Minister Jan Kees de Jager said Thursday that euro-zone governments seem to have accepted that Greece will be put into "selective default" when the country gets a new financial-aid package.

The Greek 2 year yield is down to 33.8% (was above 39%).

The Portuguese 2 year yield is down to 17.1% (was above 20%)

The Irish 2 year yield is down to 19.1% (was above 23%).

The Italian 2 year yield is down to 3.6%. And the Spanish 2 year yield is down to 3.8%.

Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year