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nd UPDATE:Greek T-Bill Sale Completes Mission,Focus On Iberia
-- Auction yield above previous tender, below secondary market
-- Bill sale apparently unaffected by restructuring speculation
-- Markets still price in debt restructuring in the near term
(Rewrites introduction, and adds quotes in second, third, fifth, 10th and 11th paragraphs, background in fourth paragraph and market reaction in sixth paragraph)
By Emese Bartha
Of DOW JONES NEWSWIRES
Greece's Public Debt Management Agency sold EUR1.625 billion of 13-week Treasury bills at an auction Tuesday, with the yield coming above the previous tender but below secondary market levels, despite the recent collapse in Greek government bonds on expectations that the country will have to restructure its debt.
"The result confirmed the usual dichotomy between auction yield and the secondary market is still there," said Chiara Cremonesi, a strategist at UniCredit Bank in London.
The restructuring worries and resulting heavy pressure on Greek paper this week didn't appear to have much impact on the auction, with demand remaining strong and the auction yield well below secondary market levels and only 25 basis points higher than at the last auction in February, she said.
The auction response is somewhat reassuring for Portugal's EUR750 million to EUR1 billion sale of three- and six-month Treasury bills and for Spain's EUR2.5 billion to EUR3.5 billion auction of April 2021- and January 2024-dated government bonds Wednesday.
Cremonesi, however, said the volatility experienced over the past few days in the euro zone's periphery may result in weaker-than-usual results at the auctions.
Traders noted muted market impact.
Nevertheless, the 4.1% yield paid by Greece, which means it now pays more for 13-week money than the 3.8% Germany pays on its 30-year bond, is likely to increase concern over the sustainability of Greece's debt-servicing costs.
The debt agency offered EUR1.25 billion of the T-bills, and also sold a 30% non-competitive tranche above the offer size.
The yield was higher than the 3.85% paid at the agency's previous tender, held Feb. 15. Greece skipped its 13-week T-bill sale in March, saying at the time it had raised enough.
"The market is focused on Greek bill auctions because it is the only market access Greece has, and considering the ongoing comments from German officials and the impact on Greek debt, a yield of 4.1% looks like a decent outcome," said Achilleas Georgolopoulos, interest rate strategist at Lloyds Bank Corporate Markets in London.
"But as an outright number to borrow 13-week money, it is clearly too high."
The bid-to-cover ratio, which shows how demand compares to the amount sold, came in at 3.45 compared with 5.08 at the previous tender, when the agency sold a significantly smaller amount of EUR390 million.
Greek debt came under heavy selling pressure Monday after it emerged that the country had proposed extending repayments on its debt, pushing yields to euro-era highs.
Greek two-year bonds now yield more than 19.3%, up from 15.44% at the end of March.
Richard McGuire, senior fixed income at Rabobank said the concern was that fears of an imminent restructuring would see the premium demanded at this sale sky rocket but "these concerns have not been borne out by this sale which, while likely doing nothing to challenge speculation of some form of near-term default, will not add to the current woes facing the Greek debt market."
Greek officials have consistently denied speculation that the country might need to restructure its debt. But its refinancing costs keep rising.
George Provopoulos, governor of the Bank of Greece and a member of the European Central Bank's governing council, on Monday played down the prospect of a debt restructuring, saying it is "neither necessary nor desirable."
"It would have disastrous consequences for the access of the government and of Greek enterprises to international financial markets, as well as very negative effects on the assets of pension funds, banks and individuals holding Greek government securities," he said.
In May last year, Greece narrowly avoided default with the help of a EUR110 billion bailout from the European Union and International Monetary Fund. The loan should cover Greece's funding needs for 2011.
In exchange for that loan, Greece has committed to a multi-year austerity program to fix its public finances and overhaul its economy.
-- Auction yield above previous tender, below secondary market
-- Bill sale apparently unaffected by restructuring speculation
-- Markets still price in debt restructuring in the near term
(Rewrites introduction, and adds quotes in second, third, fifth, 10th and 11th paragraphs, background in fourth paragraph and market reaction in sixth paragraph)
By Emese Bartha
Of DOW JONES NEWSWIRES
Greece's Public Debt Management Agency sold EUR1.625 billion of 13-week Treasury bills at an auction Tuesday, with the yield coming above the previous tender but below secondary market levels, despite the recent collapse in Greek government bonds on expectations that the country will have to restructure its debt.
"The result confirmed the usual dichotomy between auction yield and the secondary market is still there," said Chiara Cremonesi, a strategist at UniCredit Bank in London.
The restructuring worries and resulting heavy pressure on Greek paper this week didn't appear to have much impact on the auction, with demand remaining strong and the auction yield well below secondary market levels and only 25 basis points higher than at the last auction in February, she said.
The auction response is somewhat reassuring for Portugal's EUR750 million to EUR1 billion sale of three- and six-month Treasury bills and for Spain's EUR2.5 billion to EUR3.5 billion auction of April 2021- and January 2024-dated government bonds Wednesday.
Cremonesi, however, said the volatility experienced over the past few days in the euro zone's periphery may result in weaker-than-usual results at the auctions.
Traders noted muted market impact.
Nevertheless, the 4.1% yield paid by Greece, which means it now pays more for 13-week money than the 3.8% Germany pays on its 30-year bond, is likely to increase concern over the sustainability of Greece's debt-servicing costs.
The debt agency offered EUR1.25 billion of the T-bills, and also sold a 30% non-competitive tranche above the offer size.
The yield was higher than the 3.85% paid at the agency's previous tender, held Feb. 15. Greece skipped its 13-week T-bill sale in March, saying at the time it had raised enough.
"The market is focused on Greek bill auctions because it is the only market access Greece has, and considering the ongoing comments from German officials and the impact on Greek debt, a yield of 4.1% looks like a decent outcome," said Achilleas Georgolopoulos, interest rate strategist at Lloyds Bank Corporate Markets in London.
"But as an outright number to borrow 13-week money, it is clearly too high."
The bid-to-cover ratio, which shows how demand compares to the amount sold, came in at 3.45 compared with 5.08 at the previous tender, when the agency sold a significantly smaller amount of EUR390 million.
Greek debt came under heavy selling pressure Monday after it emerged that the country had proposed extending repayments on its debt, pushing yields to euro-era highs.
Greek two-year bonds now yield more than 19.3%, up from 15.44% at the end of March.
Richard McGuire, senior fixed income at Rabobank said the concern was that fears of an imminent restructuring would see the premium demanded at this sale sky rocket but "these concerns have not been borne out by this sale which, while likely doing nothing to challenge speculation of some form of near-term default, will not add to the current woes facing the Greek debt market."
Greek officials have consistently denied speculation that the country might need to restructure its debt. But its refinancing costs keep rising.
George Provopoulos, governor of the Bank of Greece and a member of the European Central Bank's governing council, on Monday played down the prospect of a debt restructuring, saying it is "neither necessary nor desirable."
"It would have disastrous consequences for the access of the government and of Greek enterprises to international financial markets, as well as very negative effects on the assets of pension funds, banks and individuals holding Greek government securities," he said.
In May last year, Greece narrowly avoided default with the help of a EUR110 billion bailout from the European Union and International Monetary Fund. The loan should cover Greece's funding needs for 2011.
In exchange for that loan, Greece has committed to a multi-year austerity program to fix its public finances and overhaul its economy.
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