New 12-month T-bill to launch

New 12-month T-bill to launch

Plans for a three-year state bond have been shelved for now, as conditions in the bonds markets remain uncertain, but the Finance Ministry is planning to issue a 12-month treasury bill next week.

The first auction of 12-month T-bills in eight years was decided some time ago, and the announcement could come as early as on Friday. The issue will replace the auction of three-month T-bills scheduled for Wednesday, March 14. However, ministry sources say the 12-month issue will not cover the entire amount of 1.6 billion euros from the three-month bills, coming instead to 1 billion.

The interest rate is expected to reach 1.5 percent. The last time a 12-month T-bill was issued was in April 2010, just before Greece entered the bailout program, when the interest rate reached 4.85 percent.

The ministry has chosen to tap the money markets again now as due to the relative calm and because bond yields have declined after increasing rapidly up until last week. On Thursday, on its fourth consecutive day of easing, the benchmark 10-year bond’s yield came to 4.16 percent, from 4.37 percent last Friday; likewise, the yield on the new seven-year bond was at 3.84 percent, against 4.08 percent last Friday and 3.5 percent when it was issued last month, and the five-year note saw its yield tumble to 3.25 percent from 3.63 percent on March 2.

The ministry’s aim for this issue is not cash-related, sources stress; it is to further enrich Greece’s yield curve, as well as taking another step toward normality. It also wants to see the country resume T-bill issues with maturities of longer than three months. It is possible the issue will relaunch in a month’s time, with another auction also in June.

The amount to be raised from the 12-month T-bills will not go toward the cash buffer, as that will need to be maintained for at least a year after the end of the bailout program this August. The cash buffer will probably come to 14 billion euros, as the original target of 19 billion has now been abandoned.

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