Greece’s latest six-month and one-year government bonds (bills) auction was flooded with demand according to Reuters. So large was the buying demand that the government allowed an additional 360 million euros in additional non-competitive bids. In total, Greece raised 1.56 billion euros of financial breathing room.
One-year bills went for 4.85% yield, while six-month bills went for 4.55%.
“The issuance was very successful. Greece raised more funds than originally announced and the issue was oversubscribed several times,” said Ioannis Sokos, a bond analyst at BNP Paribas.
The T-bill issue was smoothly absorbed. The bid-to-cover ratio was 6.5 versus 3.05 in the previous January auction.
“It’s a positive endorsement of the bailout measures that went out over the week-end,” said Ben May of Capital Economics. “But clearly the yields are still very high and longer term bond yields remain very high even by recent standards.”
Thing is, while the recent yields in the 4-5% range are down from short-term yields in the 6-7% range just a week ago, they are still well above the 2.2% Greece was paying for similar money on January 12th.
To me this shows there are some serious market concerns, which are still substantially elevated from early January levels, even after words of support from Europe over the weekend. For investors to buy 1-year money is easy, since they will get paid back before holders of long-term Greek debt, ie. in one year. They don’t need to worry about the countries medium-term problems.
Yet Greece can’t fund itself entirely on short-term debt, so let’s wait and see how 10-year Greek bonds do. Because 4.85% for 1-year money still seems extremely expensive to us right now and still a bad sign for market confidence in the country’s finances… despite the surge in buying demand.
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