Greece plans T-bill auction

City A.M. Reporter
GREECE yesterday announced plans to issue Treasury bills in mid-July to cover maturing debt.

The move is seen by analysts as a bold but risky test of market appetite as it is Greece’s first auction since securing a mammoth EU and IMF bailout last month.

The debt-choked country is not expected to issue longer-term debt before 2012 but is allowed to issue T-bills, which have shorter maturities, under the terms of the three-year, €110bn (£90bn) emergency funding programme. In mid-May, Greece received a first, €20bn tranche from the EU and IMF, allowing the government to redeem €8.5bn in maturing 10-year Greek government bonds.

“It could prove in the end to be a good idea but it could also end in disaster,” said Carsten Luedemann, fixed-income strategist at DekaBank.

“If they don’t find any bids at all or only at ridiculous levels this would prove finally that Greece is not able to go to the markets, this would be a disaster for Greece.”

Luedemann said there was a small chance Greece could sell three or six-month T-bills slightly cheaper than the rate of about five per cent it will pay on its bailout, because these bills fall due before the financing guarantee for Greece expires.

A total of €4.56bn of T-bills mature in July – €2.16bn of one-year and six-month government paper are due on 16 July and another €2.4bn of 13-week T-bills on July 23.

“Greece will go to the markets mid-July, issuing T-bills of three, six and twelve months,” said deputy finance minister Philippos Sachinidis.

Before yesterday, Greek officials had only said they were considering the T-bill auction.