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Unfavorable markets lead to Greek bond sale missing estimates

By Lukanyo Mnyanda & David Goodman

Greece raised 1.5 billion euros ($2.04 billion) in a debt sale that fell short of analyst estimates on size and yield as it took place amid a selloff in higher-yielding bonds across the euro area.

In its second offering in three months, the country that sparked Europe’s sovereign debt crisis sold three-year notes via banks at an average yield of 3.5 percent. That’s a higher borrowing cost than forecasts earlier this week of about 3 percent from HSBC Holdings Plc and Royal Bank of Scotland Group Plc. RBS had also estimated the size of the sale would reach 3 billion euros.

Portugal’s bonds led a selloff in securities from the region’s so-called periphery nations this week on instability in that nation’s banks. Greece’s transaction went ahead “despite very unfavorable conditions in international markets and especially in periphery, today and yesterday,” the Finance Ministry in Athens said in a statement.

“It points at a fragile position of the issuer in terms of being able to secure a reliable market access,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. Greece had to “accept halving its initial issuance target despite being a syndicated offer, and also had to accept a higher guidance than was initially thought,” he said.

Greece had planned to sell as much as 3 billion euros of debt, a government official said last week, asking not to be named because the details hadn’t been announced at the time.

Greek five-year notes fell for a third day, pushing up the yield by 12 basis points, or 0.12 percentage point, to 4.34 percent at 2:46 p.m. London time. That’s still down from 4.95 percent when the securities were issued in April in the nation’s return to international debt markets.

Today’s sale took place as concern that the financial system in the euro area remains vulnerable after the five-year sovereign debt crisis threatens a rally in government bonds this year. Portugal’s 10-year yield climbed above 4 percent today for the first time since May 21. That’s still down from a euro-era record of more than 18 percent set in January 2012.

Greek securities returned 66 percent in the 12 months through yesterday, the most among sovereign-debt markets tracked by the Bloomberg World Bond Indexes. Portuguese bonds earned 24 percent amid a region-wide rally fueled by the European Central Bank’s pledge to backstop the euro area.

Investors “once again expressed confidence in Greek economy,” Greece’s finance ministry said. The plan to “build a full yield curve” of bonds of varying maturities will continue, the ministry said.

[Bloomberg]

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