Reuters
June 14, 2011
Greece's short-term borrowing costs climbed at an auction on Tuesday, a day after Standard & Poor's cut its rating to the lowest of any country it covers and warned that a move to restructure its debt would be considered a default.
Barely a year after Athens was granted a 110 billion euro bailout package, the EU, the IMF and the European Central Bank are haggling over a second funding deal, while Greece's ruling party is struggling to push unpopular austerity measures through parliament.
Greece sold 1.625 billion euros of six-month T-bills, including 375 million in non-competitive bids. The issue was priced to yield 4.96 percent, up eight basis points from last month and above the rate of about 4.2 percent that Athens pays on its EU/IMF bailout loans.
The auction drew greater interest from foreign investors, who bought 37 percent of the issue compared with 34.2 percent at last month's auction, as Greece continues to fund itself in the market for short periods. But the bid-to-cover ratio, a gauge of overall demand, fell to 2.58 from 3.58.
"Yesterday's S&P downgrade weighed on sentiment, resulting in a lower cover ratio and a higher yield," said a fixed-income trader at a Greek bank.
"The market is also cautious ahead of the parliamentary vote on the government's mid-term fiscal plan later in June," added the trader, who asked not to be named.
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