Twelve-month T-bill may be next

With the premium that investors demand to buy Greek government bonds falling, the Finance Ministry is considering auctioning 12-month Treasury bills in the coming months for the first time since April. The premium investors demand to buy Greek government bonds rather than eurozone benchmark German bunds fell yesterday as the possibility of the International Monetary Fund lengthening loans to the country supported investor interest in higher yields. The Greek/German 10-year bond yield spread narrowed to 661 basis points versus 695 basis points at Tuesday’s settlement close. Brokers said a recent promise by the Chinese to buy Greek debt and steps made by the government in its deficit reduction plan have lowered the country’s risk profile. The IMF said on Sunday that bailout loans to Greece could be stretched out or replaced if refinancing worries lingered on markets, but that it currently has no concrete plans to do so. Greek government spokesman Giorgos Petalotis said yesterday that Greece has not submitted any request to extend repayments on the bailout loan from the European Union and IMF nor is it officially involved in talks that might lead to an extension. Following the positive flow of news on Greece’s fiscal health, the Finance Ministry is planning to return to the capital markets to meet the country’s debt needs in 2011 with greater certainty. As an initial step, the government may issue its first 12-month T-bill since April, when soaring yields knocked the country out of the debt market. The yield on the debt auction would need to be below 5 percent, the rate paid to the EU and IMF for its 110-billion-euro loan, in order for it to be worthwhile. Tuesday’s 26-week T-bill auction was completed at a yield of 4.54 percent, down from 4.82 percent previously. The successful auction of one-year debt in the coming months is considered necessary for Greece to start issuing bonds again, according to some market sources. A return to the capital market next year is considered feasible on the condition that there is no negative turn of events in the global economy and the Greek government meets the goals outlined in the memorandum it signed with the EU and the IMF.

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