Debt market back on agenda

Greece plans to return to the debt market next month to refinance treasury bills, according to Finance Minister Giorgos Papaconstantinou, who tried to ease concerns over the country defaulting on the 300 billion euros it owes. «July is the time when treasury bills expire and therefore will be renewed,» said Papaconstantinou in Luxembourg yesterday after meeting with his European Union counterparts. Market sources said the treasury bills maturing in early July are worth some 4 billion euros. «Another reason for issuing T-bills is that they are used as a benchmark for pricing other instruments in the debt market. Greece needs to be present in the debt market,» said a market participant «who has close knowledge of the matter,» reported Dow Jones Newswires yesterday. After months of turmoil on financial markets, Greece was effectively shut out of the international debt markets when its cost of borrowing soared to all-time record highs. The spread between Greek government bonds and their benchmark German counterparts – a measure of credit risk – rose earlier this year to more than 500 basis points and the yield to well over 8 percent. As a result, last month the government agreed to a 110-billion-euro loan package from the European Union and International Monetary Fund. Papaconstantinou said he expects the government to win approval of a second installment from international lenders in September because budget austerity plans are «on track.» The finance minister added that talk of the country defaulting and exiting the euro single currency was «laughable.» Greece faces quarterly reviews of its deficit-cutting program by the euro area and the International Monetary Fund to remain eligible over the next three years for disbursements of the rescue package. An interim assessment is due in July before a final verdict on the second installment planned for September. «We expect a clean bill of health,» said the minister. «The budget is on track.»