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Greece Prices Upsized Bill Auction At Record Yields
Greece is giddy about not only placing 3 and 6 month Bills, but also upsizing the issues from €600 to €780 million. Well, when the yield involved is more than double that of just 3 months ago, and an all time records, and the country has the full backing of the EMU, and the IMF just created a $550 billion new bailout credit facility to make sure nobody ever fails, we are shocked it took yields of 4.55% and 4.85% to get these done. To be sure, without the bailout of Germany et al, Greece would have been paying 7% on both, meaning the 2% differential is now implicitly (for now) borne by German and American taxpayers - that amounts to $42 million. Next up: let's see if Greece can price something beyond the immediate near-term horizon, especially past the guaranteed 3 year point.
From Bloomberg:
The government sold 780 million euros ($1.06 billion) of 26-week bills at a yield of 4.55 percent, attracting bids for 7.67 times the securities offered, the nation’s Public Debt Management Agency said today in Athens. Greece also offered 780 million euros of 52-week securities at a yield of 4.85 percent, with a bid-to-cover ratio of 6.54 times. In January, the 52-week bills were sold to yield 2.2 percent.
Euro-region finance ministers and the International Monetary Fund offered the country as much as 45 billion euros in loans two days ago. The nation’s bonds rose for a third day today as the lifeline boosted confidence the government will honor its debt payments.
“The result confirms that the package which was put in place on Sunday has enabled Greece to fund itself in the near- term,” said David Owen, chief European financial economist at Jefferies International Ltd. in London. “But the longer-term fundamental issues in terms of where we go from here haven’t changed. Greece has to put its finances in order against the backdrop of an economy that currently is shrinking.”
Prime Minister George Papandreou needs to raise 11.6 billion euros by the end of May to cover maturing debt, with another 20 billion euros required by year-end to pay interest and finance this year’s deficit. Last week the government estimated its 2009 budget shortfall to be 12.9 percent of gross domestic product, the biggest in the euro’s history and more than four times the EU’s 3 percent limit. The previous forecast was 12.7 percent.
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The EU-IMF rescue package may not translate into lower funding costs at Greek debt sales anytime soon, Francesco Garzarelli, chief interest-rate strategist at Goldman Sachs Group Inc. in London, another primary dealer, wrote yesterday in an e-mailed report.
“We do not think that Greek market-funding terms will decline all the way to the ones now on offer by the support package in light of pending issues on conditionality, availability and drawdown terms,” Garzarelli wrote in an e- mailed note. “Medium-term debt sustainability also remains an area of focus.”
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They will not even attempt to sell beyond the 3 year window. Read..."Fail"
And then, just as in every auction for the last 3 months, burn everyone who bought the debt.
Wash, rinse, repeat.
To the sideline observer it seems that European officials rendered a bad service to Greece with their conditional bailout. It appears that the noose on the Greece’s neck tightened as it is a lose-lose situation. If the Greeks ask for help, the existing creditors will turn their backs on Greece and the spreads will skyrocket, whereas if Greece continues its “money-attracting” excersises in the bond market they will be buried under unbearable debt service costs.
Yeah but their only borrowing 'Euros' which will be like Confederate dollars. Should try to get a hard currency like wampum or glass beads next time.
Ironically, real Confederate dollars--in good condition--are actually quite valuable. I'd much rather have a stack of original Confederate dollars than Euros.
This is a joke. Get ready for similar bs with Spain, Italy, Portugal, Ireland, etc.
Yep, sooner or later the market will call in the mark.
....and other thing, which may be the case, if Greece asks for the EU bailout it may be interpreted by ISDA as an “event of default” which should trigger a wave of compensation payments under the existing CDS contracts
I might be being thick here - but why is Tyler discussing 3 and 6 month issues and the article says they're 26wk and 52wk issues?
The Greeks had no Zeros in their math until these issues. Plus, they're not expected to get to maturity anyhow. Jeeesh.
Yeah yeah.
Wasn't that the reference yield on the cannot possibly sell 'em rate with the Imaginary Super Saver 2% Local Resident Seniors Discount Coupon good only on Mondays and Tuesdays at the local Delphian Pump and Dump under the "Let's Talk About It Some More and Do Nothing Just Notational Value Anyhow" program?
More tax loss carry forwards, anyone?