A Greek sale of short-term government securities on Wednesday demonstrates how countries that were at the forefront of Europe’s debt crisis have taken very different paths.
Greece auctioned 1.3 billion euros ($1.4 billion) of 91-day bills amid the backdrop of an impasse over financial-aid approvals from Europe. It sold the securities at an average yield of 2.7 percent, the same as in a sale on March 11 and more than the 2.5 percent from a month before that. In Spain, where the government has narrowed the budget deficit, the treasury came close to selling bills that paid no interest at an auction on Tuesday.
While Greece’s government grapples with three-year rates above 20 percent and the reputation of being the only euro-area sovereign to lose investors’ money this year, demand for Spanish securities has been buoyed by European Central Bank asset purchases and an improving economy after government programs to fix its finances.
“Greece’s fiscal dynamics are far worse” and account for the difference in borrowing costs, said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “Investors are treating Spain and Greece completely differently.”
The yield on Greek three-year notes increased 13 basis points, or 0.13 percentage point, to 20.56 percent at 1 p.m. London time, and touched 20.64 percent, a four-week high. The 3.375 percent note due in July 2017 slipped 0.145, 1.45 euros per 1,000-euro face amount, to 70.455. The 10-year rate climbed 17 basis points to 10.98 percent.
Unable to access bailout funds and locked out of international capital markets, Greece is holding out for a deal at an EU summit starting Thursday to unlock a payment from its 240 billion-euro rescue package, European officials with direct knowledge of the situation said on Tuesday. The country is facing more than 2 billion euros in debt payments Friday.
On the other end of Europe’s bond-market spectrum, Germany sold 3.3 billion euros of 10-year bonds at a record-low average yield of 0.25 percent. The yield on the 0.5 percent security maturing February 2025 fell seven basis points to 0.21 percent.