Greek 6-month T-bills sold at lower yield
The euro zone will survive its debt crisis and so will its most indebted member Greece, Eurogroup chairman Jean-Claude Juncker said on Tuesday during a visit to Athens.
Earlier in the day Greece auctioned six-month T-bills at a lower yield than the previous auction in January as part of its monthly short-term debt sales.
Euro zone leaders aim to agree in March on a comprehensive package to draw a line under the bloc's debt crisis, which was triggered at the end of 2009, when Greece revealed its finances were in a much worse state than previously thought.
"The euro will survive and Greece will be among the survivors," Juncker told reporters, adding that Athens was taking the right austerity measures and could count on the solidarity of its partners, including an extension of the maturities of its bailout loans.
Juncker also said the euro itself was not in crisis.
Tensions over what neasures the euro zone needs to take to exit the debt crisis emerged at a summit last week after Germany, backed by France, proposed a competitiveness pact that includes locked debt limits and increased retirement ages.
Juncker said the two countries must detail their proposal, which has irked a number of their partners. "It is a baby you cannot love before it is born," he said.
The cost of protecting Greek and other euro zone peripheral debt against default rose on Tuesday, with some analysts saying dissent over the competitiveness pact dampened expectations of strong measures to tackle the debt crisis.
Greek Prime Minister George Papandreou told the same news conference that euro zone leaders should take decisions in March, without delay.
"We are on the right path but as it was clear from the beginning, Europe has to take the necessary decisions as there were shortcomings in the euro zone's economic governance," he said.
390 MLN FROM SALE
Greece on Tuesday comfortably sold six-month T-bills at a lower yield than the previous equivalent auction in January, continuing to fund itself over shorter durations at a cheaper rate than it pays on bailout loans.
The 390 mln euro issue was priced to yield 4.64%, down 26 basis points from last month's far bigger sale, and drew strong interest from foreign investors.
Tuesday's auction followed some easing in the Greek yield curve in the last two weeks on hopes policymakers will agree a comprehensive solution to the euro zone debt crisis by March.
Greek bond yield spreads over German bunds have tightened more than 50 basis points to below 800 basis points. On Tuesday the 10-year spread stood at 797 basis points, up 13 bps on the day.
"The easing in the yield is due to improved expectations on resolving the debt crisis in the euro zone and the fact that the amount auctioned was smaller, about one sixth of the previous sale in January," said Costas Boukas, head of asset management at Beta Securities.
With no six-month debt maturing this month, debt agency PDMA's only rollover is 480 mln euros of three-month paper on February 18. Dealers are expecting the yield to dip to around 4.8%.
Greece switched to monthly issues of short-term debt from quarterly sales in September last year to improve its cash management as it struggles to emerge from a debt crisis that forced it to seek a 110 bln euro bailout from the EU and the IMF last May.
Tuesday's sale was well covered with the bid-cover ratio at 4.54 versus 3.4 in the previous auction.
FOREIGN BUYERS TAKE 80%
Foreign investors bought a bigger chunk of the issue this time, about 80% compared to 37% in January, the head of the debt agency said.
"We are receiving positive signals from the market for a second straight month with solid foreign participation, about 80%," PDMA Chief Petros Christodoulou told Reuters.
Greece is set to auction three-month T-bills on February 15.
Last month the overborrowed country sold six-month paper at interest rates of just under 5.0%, below the rate it pays on its EU/IMF bailout loans.
Successful issues of short-term debt could set the stage for Athens to become a more active issuer again after fears of it defaulting on its huge public debt effectively shut it out from the bond market.
