Greece Said To Tap Social Security Capital To Fund T-Bill Rollover

As reported over the past two days, in order to fund the payment on various imminent debt maturities to the IMF, the cash-strapped Greek government has been forced to consider, among other things, raiding Greek pension to procure the required funds. We noted yesterday, citing Reuters, that Greece will use short-term repo transactions to transfer the cash, but one government official said they could not be used to repay the IMF.

Greece is tapping into the cash reserves of pension funds and public sector entities through repo transactions as it scrambles to cover its funding needs this month, debt officials told Reuters on Tuesday.... At least part of the state's cash needs for the month will be met by repo transactions in which pension funds and other state entities sitting on cash lend the money to the country's debt agency through a short-term repurchase agreement for up to 15 days, debt agency officials told Reuters

"Repo" because the implication is that this funding need is temporary. Of course, should it provde to be anything but, the local population will promptly exhibit very angry tendencies once it is revealed that the "radical left" government plundered Greek pensions to pay the IMF which could then immediately turn around and use the fund to pay the Kiev government, which in turn could pay Putin to keep the gas running. Where Greece will find an additional source of funds to replace this Pension "repo" was not quite clear as of this writing.

Which brings us to the Greek T-Bill rollover auction this morning: an auction which as DB's Jim Reid summarized is one of the two main events of the day, as follows:

As mentioned the Greek T-Bill auction will be worth keeping an eye on today. The nation has a €1.4bn maturity due on Friday along with a €300m repayment due to the IMF. DB’s George Saravelos noted that the portion of the bill held by foreigners (c. €800m) may be unwilling to roll over and so potentially raise the risk that the auction does not generate the necessary amount to cover Friday’s maturity. This, combined with reluctance by the ECB to raise the cap on T-Bill issuance, will likely place the government under considerable near term pressure. It’s likely that we hear the first request from the Greek government to the ECB to increase the T-Bill issuance cap at the Eurogroup meeting next Monday. However it remains to been seen whether or not the ECB is willing to comply and instead we heard earlier suggestions from the EC’s Dijsselbloem that Europe may be willing to allow for an early disbursement of the final tranche should conditions be agreed upon.

Well, the rollover auction came, and it was successful, even if it means the yield on the paper rose from 2.75% previously to 2.97% - the highest yield in 11 months, since the 3.01% in April of 2014. Kathimerini had the full breakdown:

Greece sold 1.138 billion euros ($1.27 billion) of six-month Treasury bills on Wednesday, covering the amount it wanted to refinance a maturing issue, in a sale that tested the country's ability to raise funds amid a cash crunch. But for Athens the funds came at a higher cost. The T-bills were priced to yield 2.97 percent, up 22 basis points from 2.75 percent in a previous sale in February, the country's debt agency PDMA said.

The sale's bid-cover ratio was 1.30, unchanged from the previous sale in February and showing no deterioration in demand despite tight liquidity conditions


The amount raised included 262.5 million euros in non-competitive bids. The settlement date for Wednesday's auction will be March 6.


Issuing T-bills is the only source of commercial borrowing for the leftist government of Prime Minister Alexis Tsipras but the country's EU/IMF creditors have set a 15 billion euro cap on such issues, which has already been hit.

The problem is when looking at where the funds came from: as Bloomberg reported, also citing Kathimerini, today it was the turn of Greek Social Security funds to prop up the auction, with part of the reserves of other public entities held at Bank of Greece also used to cover the Treasury-bill auction.

Bloomberg adds that the "investment of common capital reserves was necessary as no foreign investors participated in auction, Greek banks couldn’t buy additional securities as they weren’t allowed to increase their exposure to Greek Treasury bills." The biggest problem is that, as DB framed above,  about €750m of the T-bills maturing Friday were held by foreign investors who didn’t participate in today’s auction.

In other words, first the Greek government is contemplating using pensions to pay the IMF, and today had no choice but to use social security funds to rollover its debt maturities - a process which didn't even raise any incremental money but merely kept total Greek leverage flat, in the process raiding some more of Greek entitlement funds.

How much longer, one wonders, can this continue without the population starting to ask very pointed questions? And perhaps ironically, preempting just these questions,moments ago Greece’s biggest pension fund IKA said, via Bloomberg, that "repurchase agreements is a practice which has been in place for the past four years in order to tackle real or potential cash flow problems, secure timely payment of pensions."

Press reports that use of fund’s reserves for internal borrowing is extraordinary event “do not contribute positively in this crucial period for the economy, exacerbate climate of insecurity and uncertainty among Greek pensioners."

So with that, we hope that the climate of "insecurity and uncertainty" among Greek pensioners has been restored.