Greece raises $1.6B in oversubscribed debt sale

AP News
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Posted: Oct 12, 2010 11:22 AM
Greece raises $1.6B in oversubscribed debt sale

Greece raised euro1.17 billion ($1.63 billion) Tuesday in a sale of 26-week treasury bills that was both oversubscribed and saw a drop in borrowing costs.

The sale, originally for euro900 million, received bids worth 4.22 times the total and resulted in a yield of 4.54 percent _ down from the 4.82 percent for a similar auction on Sept. 14, the country's Public Debt Management Agency said.

Last month Greece began regular monthly short-term debt issues, maintaining a presence in the market after its financial woes left it essentially blocked out of the long-term international debt market due to prohibitively high interest rates demanded for its bonds.

Although the rates demanded for Greek 10-year-bonds remain very high, the spread, or interest rate difference, with benchmark German 10-year-bonds has narrowed significantly recently, by about 200 basis points _ in other words, by 2 percentage points _ since last month. The spread above German bonds currently stands at about 7.3 percentage points, compared to more than 9 percentage points in mid-September.

The government has said it hopes to return to borrowing on the international market some time next year, if conditions allow.

Greece was saved from defaulting on its debts earlier this year by rescue loans from a three-year euro110 billion package from the International Monetary Fund and other eurozone countries. In return for the loans, which extend through to May 2013, the center-left government passed painful austerity measures, cutting pensions and salaries and hiking taxes.

Finance Minister George Papaconstantinou said Monday that a possible extension for the repayment of the rescue loans was being discussed, but that Greece had not made any formal request.

Papaconstantinou, speaking on a news program on the private Skai television station shortly after returning from a trip to the United States, where he met with investors and the head of the IMF, said there was an "ongoing discussion" about the repayment timetable of the loans.

"There has indeed been a discussion ... for prolonging the repayment of the 110 billion euros. It is a discussion which has been done, but there is no decision in this direction," he said, noting that Greece faced very high debt repayments in 2014 and 2015, when its repayments will shoot from about euro40-50 billion up to euro70 billion.

"It is a discussion which is being done informally, absolutely no decision has been taken. Greece has not requested this, let's make that clear," Papaconstantinou said. He reiterated that Greece did not need to restructure its debts.

European Commission spokesman Amadeu Altafaj said there was no official discussion on the issue.

"There is no discussion as such," Altafaj said in Brussels Tuesday. "There are no concrete plans first of all to envisage this eventuality at this time and on the contrary, what we have seen in the last days and weeks is a clear improvement in investor sentiment towards Greece. Including a remarkable decline in the spreads."

Greece was on track to meet its targets under the rescue package, and therefore "there is no case to envisage such an extension," he said.