Yield spread breaks 1,000-point barrier

Greece is hoping to draw 1.5 billion euros from six-month treasury bills, one day after the Greek/German bond yield spread broke the 1,000-basis-point mark. The difference in the yield of the Greek 10-year bond and the German 10-year bund soared yesterday morning to just over 1,001 basis points for the first time, before going back down in the afternoon to 965 bps. The early uncertainty about the future of the eurozone brought about the purchase of bonds worth a total of 65 million euros, against sales of just 1 million. However, the pressure on Greek bonds later in the day eased on rumors about an intervention by the European Central Bank by acquiring Greek, Portuguese and Irish bonds to balance out the situation ahead of crucial bond issues in the eurozone, as well as data regarding the successful execution of the 2010 Greek budget. Today the Public Debt Management Agency is conducting its first T-bill issue for 2011 with the government hoping to secure an interest rate that will not exceed 5 percent, i.e. the rate Greece has borrowed money from the eurozone and the International Monetary Fund. Sources expected the rate to be between 4.9 and 5 percent today. If the yield exceeds 5 percent, it will signify that although Greece has been under the protection of the support mechanism for six months and has reached its target to contain its budget deficit, it is still unable to secure funding on its own, even for a six-month period. Greece is in dire need of funding by investors as this year it will have to repay debts totaling 63.6 billion euros, of which no more than 40 billion will come from the eurozone-IMF support mechanism. Nevertheless the Finance Ministry appears calm about it, given that the balance in the state coffers at the end of January is expected to come to between 10 and 12 billion euros.