Yields rise on Greek debt...

 
Julian Harris
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GREEK authorities managed to sell €1.625bn (£1.425bn) of 13-week Treasury bills yesterday, at a record 4.1 per cent yield.

Despite the cost, the sale was regarded in some quarters as a success, defying fears that a restructuring of Greek debt is inevitable.

Today all eyes turn to Spain, which will issue 10 and 13 year bills in an auction widely seen as a test of whether it can avoid contagion.

Any sign of the escalating funding costs that have knocked Greece, Ireland and Portugal into accepting financial aid, are likely to spook financial markets.

Greece now pays more on its three-month debt than Germany pays on its 30-year bond, with the yield up 0.25 per cent from an auction in February.

Earlier in the day Clemens Fuest of the German finance ministry became the latest figure to pile doubt on the Greek authorities. “One must recognise the realities – I am expecting a haircut,” said Fuest, an economic adviser to the German government.

Concerns over the potential consequences of the scale of Greek repayments did not stop investors snapping up over a third (36 per cent) of the issue yesterday.

However, the cost is now roughly the rate Greece pays on its EU and IMF bailout loans (4.2 per cent).

The settlement date for the 13-week auction will be 26 April.

Up until March, Greece was funding itself on short durations at a lower cost than the 5.2 per cent rate on its bailout loans.

A summit of Eurozone leaders last month agreed to cut the rate by one percentage point and stretch out the repayment period.

Meanwhile, yesterday, short-dated Greek bond yields maintained their relentless rise, rising by over a percentage point and coming close to 21.5 per cent.

In currency markets the euro pared yesterday’s losses against the dollar by rising steadily to a peak above $1.435 (£0.88).