Thursday 14 December 2017

Greece hopes to raise €1.5bn in three-month bond auction

Nation close to requesting financial aid from IMF and eurozone peers

George Georgiopoulos

GREECE will try to raise €1.5bn via an auction of three-month bonds on Tuesday as it faces stubbornly high borrowing costs that may force it to ask for aid from its eurozone peers and the IMF.

Following a sale this week in which Athens paid far higher than usual for short-term debt, the auction precedes a trip by Greek officials to the United States to drum up support for a potential dollar-denominated bond but could reinforce a growing market view that Greece has few other options than outside help.

The Mediterranean country asked to start talks with European officials and the International Monetary Fund on Thursday, and investors are closely watching whether it can raise enough to service about €12.6bn in debt coming due by May.

Tuesday's auction is meant to address the first chunk -- €1.58bn of three-month bonds maturing next Friday. Greece must also raise €11bn more to roll over a 10-year euro bond and make debt coupon payments next month.

But worries over its capacity to service a debt load expected to exceed annual economic output by a fifth this year have hammered its bonds, driving yields to prohibitive levels.

That was already evident when the over-borrowed eurozone member paid a yield of 1.67pc in January to borrow three-month money, more than quadruple the 0.35pc it paid in October 2009 before its debt crisis exploded.

And earlier this week, it had to pay more than double and triple the cost of previous auctions to borrow one-year and six-month funds -- 4.85pc on one-year bonds and 4.55pc for six months.

Dealers said next week's auction could see the yield asked to lend funds for 3 months rise to around 4.25pc, far higher than the government is willing to pay over the long term and a rate that adds to the country's budget strains.


"It's a very short duration; it will sell, there will be interest," said the dealer who did not want to be named. "The yield could be around 4-4.25pc, perhaps even below this."

With a view to raising funds to help re-finance an €8.5bn bond coming due on May 19, Greek officials are due to set off for the United States for a road show after Tuesday, despite talk of lukewarm interest.

Greek officials have said it would be a "no-deal road show" and Athens would not be issuing a bond during the trip. Whether a dollar bond materialises will depend on actual appetite.

But the potential bond plans took a blow this week when debt costs reversed a rally following the fleshing out of the EU/IMF deal and the 10-year government yield back to 7.36pc, not far off a euro-era high of 7.45pc last week.

While Morgan Stanley has been touted as the lead underwriter for a possible Greek dollar-denominated bond offering, the investment bank says it does not have a mandate. (Reuters)

Irish Independent

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