Greece sells 1.625 bln euro T-bills, yield rises

Greece sold 1.625 billion euros ($2.22 billion) of three-month debt on Tuesday to refinance T-bills that mature this month, paying lenders more than at a similar auction in September.

The sale drew comparable demand to the previous sale with the market’s focus on Sunday’s summit of European Union leaders, where measures are expected to be announced to cushion the euro bloc’s financial system from a potential Greek debt default.

The bid-to-cover ratio in Tuesday’s sale rose to 2.86 from 2.84 in the September 20 auction.

“The sale went well considering the system’s tight liquidity. All eyes are on this Sunday’s EU council meeting and whether there will be a convincing resolution to the debt woes troubling the euro zone and not just Greece,» said Theodore Krintas, head of wealth management at Attica Bank.

Shut out of bond markets, T-bills are Greece’s only remaining access to market funding. The debt agency carries out monthly short-term auctions of six- and three-month paper.

Markets expect a new rescue package to reduce Greece’s debt, strengthen the capital of banks exposed to troubled euro zone sovereigns and leverage the eurozone’s bailout fund to prevent market contagion to bigger economies.

Greece has said it has enough cash to cover its needs until mid-November. International lenders had threatened to withhold further aid funds until Athens took additional measures to make up for fiscal slippage and meet deficit-reduction targets.

EU/IMF/ECB inspectors completed a performance review earlier in the month, saying Athens will likely receive an 8-billion euro loan tranche in early November.

Greek banks, which usually take up the bulk of the issues, about 70 percent, have used T-bills as collateral to borrow from the European Central Bank.

But the ECB has put a brake on the practice, meaning some banks may have hit their ceilings on using T-bills as collateral for funding at the ECB window.

The debt agency did not provide details on foreign take-up.

Tuesday’s issue fetched 1.625 billion euros, including 375 million in non-competitive bids. It was priced to yield 4.61 percent, up five basis points from last month and above the roughly 4.2 percent Greece pays on its EU/IMF bailout loans.

Athens needs to roll over 2 billion euros of six-month T-bills on October 21, which is also the settlement date for the 13-week T-bill auction. Non-competitive bids up to another 30 percent of the auctioned amount may be submitted by October 20.

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