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Greece Tests Market With T-Bill Sale Tuesday
Greece will auction its first Treasury bills Tuesday since accepting a bailout in May, marking a test of whether international investors are willing to buy its debt.
But in a sign that the government isn't willing to pay any price for funds, it is auctioning only 26-week bills, rather than both 26-week and 52-week bills.
Greece doesn't need the cash to pay its bills, given the €110 billion support package it is receiving from the International Monetary Fund and European Union. But the government has said it wants to maintain a presence in the market and to create a benchmark for instruments.
The auction comes at a time when other Greek short-term bills yield as much as 7.3% and foreign investors are avoiding the market.
The country's Public Debt Management Agency said Friday that it will auction €1.25 billion ($1.59 billion) of 26-week T-bills. The amount could reach €2 billion because it can raise the amount by 30% of non-competitive bids both on the auction day and again two days later.
The debt agency didn't proceed with plans to auction 52-week T-bills, as it normally does, because of the high costs of funding a one-year issue. One-year Greek T-bills currently carry a yield of between 6.0% and 6.5% in the market, well above what it would pay the EU and IMF. Under those terms, Greece can borrow at a floating rate that is currently around 4% for 12 months, said a person familiar with the deal.
"Why should we pay up?" the person said. "There is no point in paying out 12-month market rates if we have already secured that duration."
The government is betting that it will pay substantially less for six-month funds than for 12-month funds. Buyers are likely to be primarily Greek, and strong demand, as happened at recent sales, could push down yields.
At the previous auction in April, 26-week T-bills were sold to yield 4.55%, well below the peak of 10% yield in the market at the peak of Greece's financial woes around the same time. Friday, yields on those bills diverged widely depending on whether they were trading in Athens or elsewhere in Europe.
Those bills traded to yield between 3.90% and 4.30% in Athens, compared to between 3.60% and 7.80% elsewhere in Europe. This wide gap between bid and ask levels signals a very fragmented market with opportunistic deals rather than a steady flow of trading.
Analysts said Tuesday's auction won't do anything to alleviate the concerns surrounding Greece's high level of indebtedness and worries about banks that are heavily exposed to the country. But it should reassure investors that the country can still raise money from the markets in the near to medium-term, with the support of the bailout package.
"I think the Greek Treasury is trying to send a rather positive signal, trying to reassure market participants concerning its willingness to come out of the crisis and to normalize finances," said Cyril Regnat, strategist at Natixis bank in Paris. "Obviously we'd see a lot of Greek buyers, but at these levels it's opportune also for, for example, French or German investors."
Mr. Regnat said he could imagine the yield at the auction to be nearer the upper and of the 3.60%-7.80% range. "But even at 3.60%-3.70% there will be some buyers and the market's current mood is changing a little bit," he added.
Other economists, however, downplayed the significance of the auction and said it is more important that Greece continue to press ahead with its fiscal progress.
"I don't think the auction itself is very significant test," said Ioannis Sokos, strategist at BNP Paribas in London. "The major test for Greece is to remain on track with its fiscal targets, as these were agreed with the EU/IMF," he said.
The government has promised drastic budget cuts that should bring Greece's budget deficit to 8.1% of gross domestic product in 2010 from 13.6% of GDP in 2009.
"Even a very positive or negative [auction] result is not going to change anything materially," Mr. Sokos said.
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Il commento del Wall Street Journal sulla prossima emissione degli Hellenic-Bot.
Greece will auction its first Treasury bills Tuesday since accepting a bailout in May, marking a test of whether international investors are willing to buy its debt.
But in a sign that the government isn't willing to pay any price for funds, it is auctioning only 26-week bills, rather than both 26-week and 52-week bills.
Greece doesn't need the cash to pay its bills, given the €110 billion support package it is receiving from the International Monetary Fund and European Union. But the government has said it wants to maintain a presence in the market and to create a benchmark for instruments.
The auction comes at a time when other Greek short-term bills yield as much as 7.3% and foreign investors are avoiding the market.
The country's Public Debt Management Agency said Friday that it will auction €1.25 billion ($1.59 billion) of 26-week T-bills. The amount could reach €2 billion because it can raise the amount by 30% of non-competitive bids both on the auction day and again two days later.
The debt agency didn't proceed with plans to auction 52-week T-bills, as it normally does, because of the high costs of funding a one-year issue. One-year Greek T-bills currently carry a yield of between 6.0% and 6.5% in the market, well above what it would pay the EU and IMF. Under those terms, Greece can borrow at a floating rate that is currently around 4% for 12 months, said a person familiar with the deal.
"Why should we pay up?" the person said. "There is no point in paying out 12-month market rates if we have already secured that duration."
The government is betting that it will pay substantially less for six-month funds than for 12-month funds. Buyers are likely to be primarily Greek, and strong demand, as happened at recent sales, could push down yields.
At the previous auction in April, 26-week T-bills were sold to yield 4.55%, well below the peak of 10% yield in the market at the peak of Greece's financial woes around the same time. Friday, yields on those bills diverged widely depending on whether they were trading in Athens or elsewhere in Europe.
Those bills traded to yield between 3.90% and 4.30% in Athens, compared to between 3.60% and 7.80% elsewhere in Europe. This wide gap between bid and ask levels signals a very fragmented market with opportunistic deals rather than a steady flow of trading.
Analysts said Tuesday's auction won't do anything to alleviate the concerns surrounding Greece's high level of indebtedness and worries about banks that are heavily exposed to the country. But it should reassure investors that the country can still raise money from the markets in the near to medium-term, with the support of the bailout package.
"I think the Greek Treasury is trying to send a rather positive signal, trying to reassure market participants concerning its willingness to come out of the crisis and to normalize finances," said Cyril Regnat, strategist at Natixis bank in Paris. "Obviously we'd see a lot of Greek buyers, but at these levels it's opportune also for, for example, French or German investors."
Mr. Regnat said he could imagine the yield at the auction to be nearer the upper and of the 3.60%-7.80% range. "But even at 3.60%-3.70% there will be some buyers and the market's current mood is changing a little bit," he added.
Other economists, however, downplayed the significance of the auction and said it is more important that Greece continue to press ahead with its fiscal progress.
"I don't think the auction itself is very significant test," said Ioannis Sokos, strategist at BNP Paribas in London. "The major test for Greece is to remain on track with its fiscal targets, as these were agreed with the EU/IMF," he said.
The government has promised drastic budget cuts that should bring Greece's budget deficit to 8.1% of gross domestic product in 2010 from 13.6% of GDP in 2009.
"Even a very positive or negative [auction] result is not going to change anything materially," Mr. Sokos said.
***
Il commento del Wall Street Journal sulla prossima emissione degli Hellenic-Bot.
e ti ringrazio e dal punto di vista tecnico hai ragione. Pero come sai io sono l'uomo del triplo panico e con ragionata temerarietà lì dove esso si produce, lì vi sono io 