Greece borrows for less as IMF hints at extension
GREECE raised some short-term borrowings at lower costs yesterday after the International Monetary Fund (IMF) said it may give the country more time to repay loans.
This was despite German opposition to any extension of the €110bn 'bailout' fund and a statement from the EU Commission that the issue was not being discussed.
IMF managing director Dominique Strauss-Kahn said this week that Greece is taking the right steps to reduce spending and the IMF will extend terms of its loans as long as euro-region nations agree to do the same.
German Finance Ministry spokesman Bertrand Benoit said any such move is "premature". Yesterday, Commission spokesman Amadeu Altafa said there is no discussion going on between the interested parties about such an extension.
"Everything suggests that Greece will be able to fully cover its external financial needs from the markets from 2012," he said.
Greece issued €1.17bn of six- month treasury bills yesterday at a yield of 4.54pc, compared with 4.82pc at a previous sale last month. The amount issued was almost twice the €900m indicated by Athens before the sale.
"Sentiment has improved markedly for Greece after the IMF suggested it might give the country more breathing space," said Glenn Marci, a fixed-income strategist at DZ Bank in Frankfurt.
"This reduces the near-term risk of Greece having to go for haircuts or defaulting outright. It helps Greek bonds, and it also benefits treasury bills."
Moody's Investors Service, which downgraded Greece's credit rating to non-investment 'junk' grade in June, said on October 5 that it is "impressed" with the country's overhaul of its public finances. The risk to the country's sovereign rating forecast "is to the upside", assuming reforms continue, Moody's said.
Greek bonds were Europe's best performers in the third quarter, rising 4.8pc and gaining for the first time since last year when the sovereign debt crisis began, indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies show.
The yield on Greek two- year notes has dropped 1.81 points to 7.81pc since last month's sale.
"Keeping the bills market open means they don't risk losing investors and also provides them with cheaper funding than they get from the aid package," Peter Chatwell, a fixed- income strategist at Credit Agricole in London, said.
"From a trading perspective, I see value in Greek bonds," said Christoph Kind, head of asset allocation at Frankfurt Trust. "That's not to say all problems in Greece are resolved and that it's going to get better from here. It's still a long and winding road ahead of them." (Bloomberg)