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Business & Economy

Greek borrowing costs edge higher at T-bill sale

11 October, 2011

Greece sold 1.3 bln euros of six-month debt on Tuesday to help offset the cost of T-bills maturing this month, paying lenders slightly more than at a similar auction in September.
Shut out of bond markets, debt-choked Greece only carries out monthly short-term debt auctions to refinance maturing T-bills.
Tuesday's 1.3 bln euro issue, which included 300 mln euros in non-competitive bids, was priced to yield 4.86%, up six basis points from last month and above the roughly 4.2% Greece pays on its EU/IMF bailout loans.
Tuesday's auction attracted lower demand and the bid-cover ratio dropped to 2.73 from 3.02 at the September 6 sale.
"With talk of deeper haircuts, inflows into bond mutual funds have dried up and this part of the buy side is not flush with cash to take part," said Theodore Krintas, head of wealth management at Attica Bank.
There were no immediate details on foreign take-up. In the September 6 sale foreign bidders bought 31% of the issue.
Italy, whose much bigger economy has also been sucked into the crisis, managed to sell one-year debt at a lower cost of 3.57% after paying a three-year record of 4.15% a month ago.
With financial markets expecting euro zone policymakers to put together a broader solution to tackle Greece's spiralling debt crisis and shield the region's banks, the cost of insuring peripheral debt against default eased on Tuesday.
Still, due to lack of detail so far, investors remain cautious on the Franco-German plan. Greece's 10-year yield spread over Bunds has climbed above 22.3 percentage points.
Athens needs to roll over 2.0 bln euros of six-month T-bills on October 14, which is also the settlement date for the 26-week T-bill auction.