Emergency intervention by BoG to acquire T-bills

It took the contribution of a Bank of Greece general government account for the issue of six-month treasury bills to be covered on Wednesday, with the interest rate climbing to the highest levels since last April. These developments only serve to highlight the liquidity problem the state is facing, along with the departure of foreign investors from Greek short-term debt.

The state will obtain 1.4 billion euros upon the completion of the T-bill auction on Thursday, of which some 750-800 million euros was – according to sources – bought by the BoG through its joint fund where the cash reserves of general government entities are kept; the rest was covered by Greek lenders.

The share of the T-bills acquired by the central bank concerned the amount of debt held by foreign investors, as the latter showed no interest in renewing their holdings. However, the use of the BoG general government fund for T-bill purchases deprives the state of some of the capital that it uses through repo borrowing and therefore accentuates its cash problems.

The interest rate at Wednesday’s auction by the Public Debt Management Agency (PDMA) rose to 2.97 percent, from 2.75 percent at the previous such auction on February 4. The last time six-month treasury bills carried such a high interest rate was in April 2014, when it stood at 3.01 percent. After that the rate kept declining until it reached of 2 percent in November before it started climbing again.

Regardless of the difficulties it faced on Wednesday, the Finance Ministry will proceed as normal to the repayment of T-bills maturing on Friday and amounting to 1.4 billion euros.

It will also pay the installment due to the International Monetary Fund on Friday, equal to 310 million euros.

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