04 September 2012

Greece sees its borrowing costs dip as new T-bill auction raises €1.14 billion

Greece's short-term borrowing costs eased slightly in a treasury bill auction but the debt-wracked country still had to lure investors with a 4.54 per cent return for paper maturing in six months' time.

Investors are prepared to incur a slight loss to get their hands on German six-month bills, which are seen as a safe haven during troubled times. Since 2010, Greece has been unable to finance its government overspending through the usual path of selling bonds, which were demoted to non-investment grade after it emerged that the country's deficit was much higher than previously admitted.

Last month, Greece sold €5 billion worth of three-month debt to pay off a maturing bond held by the European Central Bank. The treasury bills are mostly bought by cash-needy domestic banks that use them as collateral to tap emergency European funds.

To qualify for the next €31 billion rescue loan instalment, the conservative-led governing coalition must work out a new €11.5 billion austerity package for 2013-14 that has to be approved by bailout creditors later this month.

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