© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
June 28, 2010 7:22 pm
Investors stepped up warnings on the dangers for Greece on Monday over its decision to return to international capital markets next month for the first time since it was offered emergency loans in May.
Greece needs to refinance €4.56bn ($5.6bn) maturing in July. This includes €2.16bn of one-year and six-month bills due on July 16 and another €2.4bn of 13-week paper due on July 23.
“Next month’s return to markets is foreseen under the terms of the EU-IMF memorandum, so the decision has effectively been taken,” said Yiannis Stournaras, head of the independent Athens economic think-tank IOBE.
The regular issuance of treasury bills would continue throughout the three-year programme, according to the memorandum, he added.
David Owen, chief European financial economist at Jefferies, said: “It seems a very odd thing to do. The Greek banks may buy the bonds, but there is a danger the government will have to pay very high yields that could undermine confidence not just in Greece, but across the eurozone.”
On Monday, Greek three-month bills were trading at yields of 4.10 per cent, six-month bills at 6.92 per cent and one-year yields at 7.31 per cent. These rates are much higher than the country has to pay for emergency loans as part of its rescue plan.
At the last auction in April, yields doubled compared with the January sale. The yield for three-month bills rose to 3.65 from 1.67 per cent.
The Greek government appears determined to stick to the letter of the memo in spite of record yields on Greek bonds – a situation that had not been anticipated when the €110bn bail-out for Greece was put together last month.
Philippos Sachinides, deputy finance minister, said three-, six- and 12-month treasury bills expiring in July would be rolled over.
The government hopes yields will fall after parliament approves a radical overhaul of the pension system, expected on July 8 and seen as critical to Greece’s fiscal consolidation.
Jason Manolopoulos, portfolio manager at Dromeus Capital in Athens, said he expected yields to fall once the pensions law raising the retirement age is approved.
Separately, the European Central Bank said on Monday that it had bought another €4bn of eurozone government bonds. It has bought €55bn in total.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in