Greece to tap debt market on Jan 11

ATHENS: Greece will auction euro1.5 billion ($1.96 billion) in 6-month treasury bills next week, testing market sentiment as long-term borrowing rates reached new record highs.

The public debt management agency said Friday the sale, the first since mid-November, will be on Jan 11, and that its size may be increased by as much as 30 percent.

Debt-ridden Greece only avoided bankruptcy in May through massive foreign rescue loans that will total euro110 billion ($144 billion) by mid 2013. In return, the Socialist government slashed salaries and pensions, while raising sales taxes and retirement ages, moves that sparked repeated union protests.

Although effectively blocked from long-term borrowing on international markets due to prohibitively high interest rates, the country started issuing treasury bills in September.

Athens last sold treasury bills on Nov. 16, raising euro390 million ($510 million) from a 13-week issue that was oversubscribed, but resulted in a high yield. The last six-month sale, in October, raised euro1.17 billion ($1.53 billion) at a yield of 4.54 percent.

Although the government has repeatedly voiced hopes of returning to bond markets some time this year, the prospects are dire. On Friday, the interest rate for the country's 10-year bonds came close to 13 percent, a new record high and nearly 10 percent more than what Germany has to pay for its benchmark issues of the same maturity.

Greece remains under strict supervision by the International Monetary Fund and European Union, which provided the bailout loans, and has pledged to reduce its bloated budget deficit from 15.4 percent of gross domestic product in 2009 to 2.6 percent in 2014.