* Foreign investors shy away
Greece sold six-month T-bills at a slightly higher yield on Tuesday than a previous February auction, its first borrowing sortie after a three-notch Moody's downgrade to B1 raised yield spreads to near peak crisis levels.
The auction drew less interest from foreign investors, who bought about 31% of the issue compared to 80% in a previous, smaller issue last month as the overborrowed euro zone member keeps funding itself over shorter durations.
Tuesday's 1.625 bln euro issue was priced to yield 4.75%, up 11 basis points from last month and still cheaper than the 5.2% it pays on its EU/IMF bailout loans.
"We are happy to see foreign buying interest continuing," the head of the country's debt management agency (PDMA) Petros Christofoulou told Reuters.
Tuesday's auction coincided with a further widening of Greek government bond yield spreads over German bunds after Moody's rating cut reignited worries of a restructuring down the line.
The yield spread on 10-year Greek government bonds over German bunds widened 25 basis points on the day to 941 bps, its widest level since mid-January.
"After the Moody's downgrade a rise in the yield was inevitable," said Stelios Vyzantinopoulos, a senior fixed-income trader at Marfin Bank.
"Spreads are again near all-time highs. Yields in the next auctions will be tied to the results of the March EU summits," he added.
EU leaders will meet on March 11 and 25 to discuss an economic pact to help resolve the euro zone's debt crisis.
Debt agency PDMA needs to roll over 1.44 bln euros of six-month T-bills maturing on March 18 and is set to auction 3-month T-bills the following week.
10-YR YIELDS
The yield on 10-year Greek government bonds rose to a new euro-lifetime high on Tuesday as selling pressure showed no sign of slowing after the country's credit rating was slashed in the previous session.
"To me it was a big downgrade yesterday — three notches at one go is fairly aggressive," a trader said.
"I think we're seeing a bit of forced selling but obviously Greece is a very thin market nowadays."
The yield on 10-year Greek bonds rose to its highest since the launch of the euro currency at 12.946%, up over half a percentage point on the day.
