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Greece raises $2.5 billion in debt sale

By Derek Gatopoulos

Associated Press

Published: Tuesday, Jan. 11 2011 7:28 a.m. MST

Greek Prime Minister George Papandreou makes a statement after his meeting with Greek President Karolos Papoulias at the Presidential palace, seen in the background, in Athens, Tuesday, Jan. 11, 2011. Greece on Tuesday raised euro1.95 billion ($2.5 billion) in a treasury bill auction, easing concerns in the troubled eurozone country a day after bond yields hit a record high.

Thanassis Stavrakis, Associated Press

ATHENS, Greece — Greece on Tuesday successfully raised €1.95 billion ($2.5 billion) in a treasury bill auction, easing some concern in the troubled eurozone country a day after its bond yields hit a record high.

The country's Public Debt Management Agency said the 26-week bill auction for the starting amount of €1.5 billion was oversubscribed 3.4 times.

The sale — considered an important test of market sentiment — resulted in a yield of 4.9 percent, only slightly higher than the 4.82 percent in the previous auction of 26-week treasury bills, on Nov. 9.

Government spokesman Giorgos Petalotis said the sale indicated that Greece was "regaining credibility abroad," though analysts remained skeptical.

"On the one hand, there is reason for relief given that these (peripheral EU) countries are still able to secure market funding," said Michael Leister, a fixed-income analyst at the WestLB commercial bank in Dusseldorf, Germany.

"But obviously the price is unsustainable, currently, in terms of yield. Greece is now paying almost 5 percent for a 26-week bill. They can do this from time to time, but they won't be able to continue doing so for ever."

On Monday, Greek bond yields touched another record high, exceeding the 10-year equivalent German yield by 10 percentage points for the first time, amid a broader flare-up in Europe's debt crisis.

Greece has launched a major effort to cut borrowing costs in exchange for bailout loans worth €110 billion from the IMF and other countries using the euro. Despite being in recession, it's ambitious deficit-reduction targets were broadly met last year.

The government insists it wants to return to long-term bond markets — 2-year maturities and above — sometime this year.

Finance Minister George Papanconstantinou told the business news TV channel CNBC, he believed Greek borrowing rates had been pushed back up by "broader turbulence in European markets."

He said Greece would be helped by a likely extension of repayment deadlines for the bailout loans, and possible European Union action in the dealing with the debt crisis across the bloc.

"I think were are going to be seeing in the next two months major decisions that will once and for all settle the issue of sustainability of debt in the eurozone," he said in the Tuesday interview.

But WestLB's Leister said investors, while attracted to short-term debt deals, remain spooked by Greek bonds.

"Basically for first half of the year, we expect spreads to remain at wide levels and also volatile," he said.

"The feedback we're getting from the more traditional investor base that used to buy this debt before is that the appetite is really limited given that ... they are really scared by the high volatility of these products."

Shares on the Athens Stock Exchange recovered from heavy losses Monday, and were up 1.96 percent in afternoon trading Tuesday, with the bourse's general index at 1,381.23 points.

Online:

Greek Public Debt Management Agency: http://www.pdma.gr/

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