In Brief
Portuguese PM buys time after T-bill auction LISBON (Reuters) – Prime Minister Jose Socrates’ fight to avoid a bailout for Portugal was bolstered yesterday by a successful treasury bill auction in which the country’s borrowing costs fell. Demand was strong for the 750 million euros of T-bills on offer and the 12-month yield – the rate which the borrower pays – fell to 4.029, down from 5.281 percent in a similar auction last month. The positive development followed an encouraging bond auction last week and buys Socrates some time as he tries to impose austerity measures and avoid the fate of Greece and Ireland, which were both forced to accept rescues last year from the European Union and International Monetary Fund. The premium investors demand to hold Portuguese 10-year bonds rather than German benchmarks fell to around 380 basis points yesterday, the lowest level in over two weeks. «I think there is the perception of some decline in Portuguese risk in the short term,» said Filipe Silva, debt manager at Banco Carregosa, after the auction. An opinion poll showed yesterday that President Anibal Cavaco Silva looked certain to win re-election in a presidential vote on Sunday, a result which would shore up political stability for the time being. The survey, published in business daily Diario Economico, gave Cavaco Silva, of the center-right Social Democratic Party, 61.5 percent of the vote. His closest competitor, Manuel Alegre of the ruling Socialists, garnered 15 percent. Report: Greek banks face rocky road ahead Greek banks face a «rocky road ahead» because of bad loans, deposit outflows and concerns that the European debt crisis may worsen, according to HSBC Pantelakis Securities. «Sovereign-risk fears, Greece’s prolonged economic recession and challenging liquidity conditions will dominate the sector for another year,» analyst Dimitris Haralabopoulos wrote in an e-mailed note yesterday. Greek Prime Minister George Papandreou has imposed austerity measures, including higher taxes and lower wages, in return for a 110-billion-euro ($148 billion) bailout in May from the European Union and the International Monetary Fund. Ireland in November followed Greece by seeking a rescue, while investors remain concerned that the debt crisis will spread to Portugal, Spain and Italy. Greece must adhere to its fiscal reform plan «amid heightened concerns over a sovereign credit event, more than ever before,» HSBC said. The country’s central government deficit contracted 36.5 percent in 2010, the Finance Ministry said in preliminary data released on January 10. Deposit outflows are expected to reach 20 billion euros this year and Greek banks will draw on funding from the European Central Bank as they remain locked out of wholesale and interbank markets, HSBC said. Deposits by businesses and households held in Greek banks dropped to 208.9 billion euros in November from 211.1 billion euros in October, according to central bank data. Reliance on ECB funds grew to 95 billion euros in November. Nonperforming loans are seen marking a «more aggressive increase» to 14.1 percent in 2011 before they peak in the first half of 2012, according to HSBC. (Bloomberg) Zenon gains Cyprus Airways, the country’s state-controlled carrier, expects to earn about 3.6 million euros ($4.8 million) from the sale of its wholly owned unit Zenon NDC Ltd. The sale will strengthen the company’s liquidity and capital, the Nicosia-based airline said in a filing to the Cyprus Stock Exchange yesterday. Cyprus Airways said on January 14 it sold the unit for $5.5 million to closely held Texas-based Sabre Holdings. Cyprus Airways, which controls 28 percent of the east Mediterranean island’s air-traffic market, plans to restructure after growing losses. (Bloomberg) More tests The International Monetary Fund is running a health check of top banks in Britain, Germany and three more countries just as Europe hammers out details of its own tougher industry «stress test.» The round of IMF health checks in Europe will start in Britain, three sources told Reuters, to be followed by Sweden, the Netherlands, Germany and Luxembourg. (Reuters)
