Relief for year?s first debt sale

Greece?s first short-term debt sale of the year cost the government a bit less than expected on Tuesday but met with weakening demand amid growing concerns about the eurozone debt crisis.

The Public Debt Management Agency said yesterday it auctioned 1.95 billion euros of 26-week treasury bills at a rate of 4.9 percent, versus 4.82 percent during the previous auction held in early November. Traders were expecting the yield to come in at about 5.0 to 5.25 percent.

Apart from falling short of expectations, the 4.9 percent yield is seen as important by market experts as it is lower than the 5 percent rate at which Greece borrows from the European Commission and the International Monetary Fund.

Bids for the debt covered the total amount 3.4 times, down from 5.2 times previously when 300 million euros of T-bills were sold. About 37 percent of the total amount sold yesterday went to foreign portfolios.

The news comes at a time when speculation is growing that Portugal will follow Greece and Ireland in seeking a bailout in order to avoid default. Portugal is set to auction 5- and 10-year bonds today ahead of further debt sales by Spain tomorrow, testing investor appetite for eurozone periphery states. Italy had no problem selling 7 billion euros of 12-month bonds yesterday, though yields rose modestly.

Athens plans to issue 13-week treasury bills next week despite having its debt servicing needs covered by the 110-billion-euro EU-IMF package agreed to last year.

The Finance Ministry says this helps it keep in touch with the market as it plans to start issuing bonds later this year.

Johannes Jooste, a portfolio strategist for Merrill Lynch Wealth Management, said yesterday that this will depend on how investors greet the sale of T-bills in the first few months of the year.

?If early [short-term] debt auctions go well, then the prognosis for 2011 is that it will go reasonably well,? Jooste told reporters.