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Greece Pretends It Has Capital Markets Access By Continuing To Sell Ultra-Short Term Debt At Astronomical Spreads
After a frabjous placement of 6 month bills last week (at just under a whopping 5%), Greece continues the charade of pretending it has capital markets access by announcing it will sell another €1.5 billion of 3 month bills on July 20, 2 days before the Stress Farce results are announced. Of course, with 3 Month Euribor about 3 % lower than where this paper will come, and as the ECB will likely end up purchasing about 80% of the auction via Greek bank intermediaries, all this action does is to merely reinforce just how isolated from money and other markets Greece (just like Spain and Portugal) continues to be. And as for the reason for this harried sale, it is merely to roll a greater amount of maturing bills - the last thing the country would want is to disclose that it is literally insolvent, as opposed to just metaphorically.
From Market News:
The T-bill sales come as the Hellenic Republic has to repay E1.95 billion in two payments due 16 July and a single payment of E2.4bln due on 23 July. In addition, the T-bill sales are also seen helping Greek banks with their liquidity management.
Whilst the EU-IMF's E110 billion emergency funding programme was designed to cover Greece's financing needs until the end of Q1 2012, it was also due to act as a shield and help Greece amke a full return to markets as soon as possible, which is likely to be in 2011.
And some more on why the country is now living "paycheck to paycheck" from Bloomberg:
Next week’s sale will be the second since the country accepted a EU-led bailout in May. The 26-week auction signaled that confidence among banks in Greece, which purchased 80 percent of the bills sold, is growing after Prime Minister George Papandreou’s government cut wages, postponed retirements and raised taxes to trim the euro-region’s second-highest budget deficit and restore investor confidence. [The issue is that these bank can immediately turn around and pledge the debt as collateral to the ECB, thereby facilitating ongoing debt monetization by JC Trichet]
Next week’s sale will be the second since the country accepted a EU-led bailout in May. The 26-week auction signaled that confidence among banks in Greece, which purchased 80 percent of the bills sold, is growing after Prime Minister George Papandreou’s government cut wages, postponed retirements and raised taxes to trim the euro-region’s second-highest budget deficit and restore investor confidence.
The debt agency sold the 26-week bills at a yield of 4.65 percent. About 4.5 billion euros of short-term securities come due from July 10 to July 23 and the rollover isn’t fully funded by the 110 billion-euro lifeline received in May to avoid default, according to an International Monetary Fund document.
In other words, the country has about a 24 hour rolling buffer before it runs out of money. Surely, this is sufficient to drive the EURUSD over 1.30...
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This game has to have an end...
Tyler, it´s not about pretending the market acces, it´s about saving money. Bailout loans come at 5% yield, anything than get bellow, is saving money.
I mean, they have what they wanted. Greece never wanted a bailout, they wanted cheap loans and the bailout shield allows them to borrow "cheaply".
2Y debt is shorter than "bailout" loans, no? And what of rolling that debt in a mere two years from now?
No one seems to care, gold is still being sold for Euros.
just who is buying up the Euros
whoever is selling the gold.
The BIS Gold Swapped for EURO's
My guess now is that the play now is to buy high yield euro paper now and then dump it after the release of "better than expected" stress test results.
Hence the euro ramp now.
When is the next long dated greek/portugese bond auction, will be funny when that one fails.
It feels like they are loaded up on the short dated shit now and hope that in the stress test announcement afterglow they can dump the whole load of shit on the greater fool.
Stocks or Bonds? One of the two has to come back to reality. Bout time for Benny Boy to raise rates. IMO the bond market is the more crowded trade right now. We will see what happens.
The EU nations NEED a weak Euro instead their CB's pump Billions into it, weakens their EU economy. Might as well make the whole continent a museum, that where its headed.
There are certainly a lot of old people there, and young mosques.
Ultra short term with those yields is insane. Simply not serviceable. They know it too.
Isn't it funny? Until just some months ago the US where rolling short terms bills like joint-addicted, then the Eu Sovereign debts Bubble exploded putting EU under pressure and making the whole word stampede toward US T-bills again... now one wonders about Greece rolling ultra short bonds: a pity Greece has no rating agencies to bitch about other nation's finances: they will have to be more creative...
That was one of my contentions from last year - extend and pretend long enough for the EU to catch fire. Capital flees into UST and we buy another day of survival. Issues within the EU almost assure that it will take quite some time for the tables to be turned.
Greece has recently published some new figures for the half year showing an extraordinary improvement in her fiscal deficit of around 46%. Since her austerity measures have only just begun I wondered how her figures could have improved so quickly. But I have found a few possible reasons on the notayesmanseconomics web blog.
"According to this the Greek state has unpaid bills of 10 billion Euros in 2010 which can be broken down into 6 billion to hospital suppliers, 1.6 billion to construction companies, 1 billion in unpaid VAT refunds, and rather curiously 0.1 billion to Media all around the world whatever that is, and the rest for bills such as the financing of investment programmes."
If so then this is something of a dodgy game as weren't dubious statistcs a contributor to Greece's difficulties? For those interested the full article is on http://notayesmanseconomics.wordpress.com
"Beware the Jabberwock, my son!
The jaws that bite, the claws that catch!
Beware the Jubjub bird,
and shun the frumious Bandersnatch."
Vorpal swords, everyone.
A crime is commited in Greece by the Socialists.
A modern Greek Genocide.
Soon all the traitors are going to be in jail.
Homesick for Colonels perhaps?
Meanwhile back at the farm:
The Piraeus Bank is offering a pittance to buy (the state's stake in) Agrotiki Bank -- is this a case of the blind leading the one-eyed or what?
[Note: "agrotiki" = farmer's]
They are also after the Postal Bank (Tachydromikon Tamieytirion), the one solvent albeit small bank in the Greek landscape.
The DOW/SP00 leg down has started.
http://stockmarket618.wordpress.com
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