Greek bond yields near nine-year high
By Kerin Hope in Athens, Jamil Anderlini in Beijing and David Oakley in London
Published: January 26 2010 22:59 | Last updated: January 27 2010 11:51
China’s foreign exchange reserves grew $130bn in the last quarter of 2009 alone
Greek bond yields rose on Wednesday to the highest levels since the country joined the euro in April 2001 as the finance ministry said no deal had been reached to sell bonds to China.
The spread between Greek and German bond yields also rose to a euro lifetime high after Athens said it had not mandated
Goldman Sachs , the US investment bank, to sell Greek bonds to China.
Greece is wooing China to buy up to €25bn of government bonds, a move that underlines Beijing’s growing financial power, as it
struggles to fund soaring public debt .
Goldman has been promoting a Greek bond sale to Beijing and the
State Administration of Foreign Exchange (Safe), which manages China’s $2,400bn foreign exchange reserves, said people familiar with the issue.
Gary Cohn, Goldman Sachs chief operating officer, has made two trips to Athens – last November and this month – to meet George Papandreou, prime minister and senior officials.
Beijing has not agreed to such a purchase. Meanwhile, Athens has rejected a suggestion that a Chinese bank should acquire a strategic stake in
National Bank of Greece, the country’s flagship commercial lender, according to officials contacted by the FT.
But a more modest deal of about €5bn-€10bn ($7bn-$14bn) appeared possible after Mr Cohn’s second trip to Athens, officials said on Tuesday.
George Papaconstantinou, finance minister, told the FT he would visit China on a road show next month, but “no target is set” for a debt placement.
China’s foreign exchange reserves grew $130bn in the last quarter of 2009 alone. But people close to Safe said China already held a “significant amount” of Greek debt and was wary of adding to that.
A senior Greek finance ministry official said Athens would welcome Chinese buyers of its bonds. The official declined to specify an amount, though a figure of €20bn-€25bn was raised in talks with Goldman Sachs.
A €5bn syndicated loan issue by Greece this week attracted bids worth more than €20bn, but Greece continues to face pressure in financial markets.
Greek benchmark 10-year bond yields, which have an inverse relationship with prices, rose to 6.42 per cent on Wednesday, an 18 basis point rise on the day and more than 150bps higher than at the start of December last year.
Greek yields are trading 332 basis points over Germany, up 28 basis points on the day, as investors demanded a much bigger premium to buy Greek debt.
Goldman Sachs mooted the sale of equity in NBG to
Bank of China, the country’s third-largest commercial lender by assets, and made a similar proposal to China Investment Corp, China’s sovereign wealth fund, according to officials.
Chinese officials said CIC was not interested and that regulators would not let BoC make such a risky investment. Goldman Sachs and CIC declined to comment. A Bank of China spokesman said: “I haven’t heard anything about it.”
Additional reporting by Justin Baer and Francesco Guerrera in New York