Greece raises 4.06 bln euros in T-bills in time to repay bond

Cash-strapped and behind targets agreed under a 130 billion euro ($160.4 billion) financial rescue package, Athens must repay a 3.2 billion euro bond on Aug. 20 held by the European Central Bank.

Starved of funding options, Athens increased the size of its monthly T-bill auction after the ECB agreed to raise the ceiling on the amount of such bills the Bank of Greece can accept as collateral in exchange for emergency loans.

That move gives the government access to up to an extra 4 billion euros of funds. Greek banks taking up the bulk of T-bill issues can park the paper at the local central bank to tap its emergency liquidity assistance (ELA) window.

"There's relief. The auction went relatively well given the circumstances," said a senior dealer at an Athens-based foreign bank who requested anonymity.

"Banks will take the T-bills to the Bank of Greece's ELA mechanism and fund them with a small haircut. They will get about 94% of the face value and liquidity will be recycled," the dealer said.

The debt agency raised of 4.0625 billion euros, including 937.5 million in non-competitive bids. Athens expects to raise a total of 5.0 billion euros as it will accept additional non-competitive bids of up to 30% of the auctioned amount by Aug. 16.

The three-month T-bills were priced to yield 4.43 percent, up from 4.28% in a previous July 17 sale. The auction's bid-cover ratio came to 1.36 versus 2.12 previously.

Shut out of bond markets, Greece issues T-bills on a monthly basis to refund maturing short-term paper. A previous 1.6 billion euro issue of three-month paper matures on Aug. 17, the settlement date for the auction.