Greek bondholder Japonica keeps faith as Morgan Stanley wavers

By David Goodman & Lucy Meakin

As Morgan Stanley strategists give up on Greek sovereign bonds, there's at least one investor who says he's determined to ride out the storm.

Paul Kazarian, the founder of Japonica Partners & Co., is unruffled by a standoff between Greece's government and the organizations behind the country's bailout loans. He's actually becoming more optimistic about Greece's future, saying the current turmoil is caused by a deliberate short-term cash crunch, and the longer-term debt picture is more positive.

"We haven't sold anything and we're not planning to," Kazarian, whose firm bought Greek securities in 2013, said in an interview in London. "Greece is now suffering from a contrived liquidity squeeze. They don't have a debt problem, they have a management challenge."

Kazarian's view puts him at odds with UniCredit SpA's chief global economist, Erik Nielsen, who said on March 15 that he was "throwing in the towel" on Greece. Morgan Stanley strategists this week removed Greek bonds from their list of top trades for 2015. Both banks cited an increased risk that Greece will exit the euro area.

Unable to access bailout funds and locked out of international capital markets, Greece faces more than 2 billion euros ($2.1 billion) in debt payments Friday. Negotiators from the country are holding out for a deal at a European Union summit starting Thursday to unlock a payment from its 240 billion-euro rescue package, European officials with direct knowledge of the situation said on Tuesday.

Inverted curve

The nation's three-year note yields ended Tuesday at 20.43 percent, the highest close since Feb. 11, as the price of the securities sank to 70.6 percent of face...