Greek banks on Wednesday joined the country’s battle to secure liquidity and replace the funds the government is drawing from the state’s cash buffer so as to finance the support measures for the economy and businesses. Lenders recorded a high level of participation in the Public Debt Management Agency’s (PDMA) treasury bills issue on Wednesday, a trend set to continue in the coming weeks and months.
The PDMA auctioned 26-week T-bills on Wednesday through which the state drew 1.3 billion euros, while the final amount will rise to €1.6 billion with the non-competitive bids, against total offers of €1.666 billion with an interest rate of 0.36 percent.
Market sources said the participation of foreign banks in the auction was small (their bids added up to €400 million), while the bulk of the issue was covered by Greece’s four systemic banks.
Foreign investors’ low interest is attributed to the general strategy of foreign portfolios amid the coronavirus pandemic – i.e. to hold on to their liquidity. A recent Bank of America survey showed that the cash levels in institutional investors’ portfolios are at their highest since September 11, 2001, at 5.9 percent on average.
The particularly strong participation of Greek banks in the process follows the boost the European Central Bank offered Greece by including the country’s bonds in the extraordinary bond-buying program (it has already acquired an estimated €1.5-2 billion in Greek debt) and by accepting Greek bonds as collateral. Therefore local lenders do not need to exchange their securities in the interbank market, but can go straight to the ECB, where the interest comes to -0.50 percent (against 0.36 percent in the T-bill issue on Wednesday), without shouldering the interest cost of the interbank market.
The PDMA will not surprise the market by making more issues, but will expand its existing ones instead. The state drew between €600 million and €1 billion in each of the previous T-bill issues this year, far less than from yesterday’s issue.