Greece passes debt auction test

In the first test to be faced by the government on capital markets since getting bailed out in May, Greece raised 1.625 billion euros yesterday in a short-term debt auction that attracted solid investor interest. The Public Debt Management Agency (PDMA) said the sale of 26-week treasury bills was oversubscribed 3.64 times, at an interest yield of 4.65 percent. The sale was seen as an important test of Greece’s financial recovery effort amid continued Europe-wide concern over sovereign debt. Foreign investors accounted for 20 percent of total demand, while at least 10 foreign banks took part in the sale. «We are happy with the composition of the investor base and participation,» PDMA head Petros Christodoulou told Bloomberg. «Starting from the very short end of the market, this is a thumbs-up for the fiscal policy that has been implemented.” The debt agency said the final amount taken was 1.625 billion euros, after it accepted an additional 375 million in noncompetitive bids for the auction of 1.25 billion euros. But the auction highlighted that Greece still has some way to go in convincing investors. The yield was higher than a previous similar sale and what other troubled eurozone economies have paid recently and the demand, while solid, was lower. «We were expecting a good result, and it’s good for Greece and the euro, but [Greece] has a long way to travel, as its economic challenges are pretty severe. It’s going to take years to figure this out, not just one auction,» Paul Robinson, a currency strategist at Barclays Capital in London, told Reuters. Less oversubscribed than a previous auction in April, the sale produced a yield of 4.65 percent versus 4.55 percent in an April 13 sale of similar duration paper. Additionally, Portugal sold six-month T-bills at 1.947 percent on July 7, while Spain had to pay a yield of 1.577 percent on June 22 for six-month paper. Following news of yesterday’s T-bill auction, Finance Minister Giorgos Papaconstantinou said the government may resume bond sales next year. «We are satisfied,» Papaconstantinou told reporters in Brussels after a meeting with his European Union counterparts. «The year 2011 will be a good one to come back to the market, assuming conditions continue to normalize.» Greece’s goal is to reduce the budget deficit from 13.6 percent of gross domestic product last year to within the EU’s 3 percent limit in 2014 and the government faces quarterly EU and IMF reviews. With the next assessment due this month, Papaconstantinou said the country will meet the conditions for a second aid disbursement of 9 billion euros in September. «We are completely confident of the green light for the next installment,» he said. Eurogroup sees fiscal recovery on track Greece’s fiscal consolidation program is on track and should allow the country to obtain a second tranche of aid from the International Monetary Fund and the European Commission, according to eurozone finance ministers. «The Greek government program… is impressive and has outpaced our expectations,» Eurogroup Chairman Jean-Claude Juncker told a news conference in Brussels late on Monday, summing up a debate on Greece among the currency area’s 16 finance chiefs. European Union Monetary Affairs Commissioner Olli Rehn said, «The Greek program of fiscal consolidation and structural reforms is on track.» Greece’s ballooning budget deficit forced the EU and IMF to grant 110 billion euros in aid to the country, starting in May. Juncker said he was confident Greece would receive the second aid installment in September, although an official mission of the EU, the IMF and the European Central Bank must first give the country a clean bill of health in August. Provisional data released by the Finance Ministry on Monday showed that the 2010 budget deficit has been reduced by 46 percent in the first half of the year to 9.6 billion euros.

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