Greek T-Bill Auction Completed But Default Fears Stay
-- Domestic money market funds enable Greece to roll-over short-term debt
-- Default worries still roil Greek bond market
(Adds analyst comments, background throughout)
By Emese Bartha
Of DOW JONES NEWSWIRES
The Greek Public Debt Management Agency sold EUR1.3 billion in 26-week T-bills Tuesday, garnering ample demand from domestic buyers despite the country's government bond market signaling near-term default fears.
The auction was Greece's first since a dispute broke out over Finland's demand for collateral in exchange for its participation in a second bailout for Greece.
Coupled with worries about Greece's ability to deliver on its austerity targets under its bailout programs and a shrinking Greek economy, this has pushed yields on short-dated bonds to new highs. Greek two-year bonds yield 49.9% Tuesday, according to Tradeweb.
"A Greek default is coming," Harvinder Sian, a strategist at Royal Bank of Scotland, said in a note Tuesday.
Bond investors are also in the midst of assessing the Greek government's proposals to swap some of the country's existing bonds for new, longer-dated debt.
But despite the turmoil in the bond market "Greece is still managing to have access to the T-bills markets," said Jean Francois Robin, a strategist at Natixis. "The money market is still alive thanks to domestic money market funds," he said.
As was widely expected, the auction results came out in line with the previous tender conducted in August, with the yield easing slightly and the amount on offer covered comfortably. The agency offered EUR1 billion and the amount sold includes a 30% non-competitive tranche, in line with Greek auction rules.
The PDMA sold the T-bills at a uniform yield of 4.80%, down from 4.85% at the previous auction Aug. 9. The bid-to-cover ratio--a key gauge of investor demand--came in at 3.02 compared with 3.06 previously.
The bid-to-cover ratio was "amazingly comfortable," said Robin.
Greece was shut out of the bond market when it was forced to ask for financial aid from the European Union and International Monetary Fund last year, but the debt agency continues its regular T-bill sales to enable a roll-over of existing short-term investments.
The PDMA brought forward Tuesday's 26-week T-bill auction by a week to make the payment date of this T-bill auction coincide with the redemption of a six-month T-bill line Sept. 9.
The PDMA also regularly auctions 13-week T-bills on the third Tuesday of a month. PDMA head Petros Christodolou told Dow Jones Newswires Friday that the 13-week T-bill auction will take place on the third Tuesday of the month, as usual.
