Greece’s bill sale marks return to market amid negotiations

Greece is set for its first foray into debt markets under its new government led by SYRIZA’s Alexis Tsipras when the nation sells Treasury bills on Wednesday.

The Athens-based Public Debt Management Agency plans to auction 625 million euros ($716 million) of six-month securities. Non-competitive and second-day bids would normally raise the amount sold to 1 billion euros, which would refinance 947 million euros of securities coming due on Feb. 6.

About 15 billion euros of Greece’s debt consists of short- term bills, which the country continuously rolls over. This covers financing needs while its bailout review remains stalled, and no aid disbursements are being made from the euro area and the International Monetary Fund. Even during the region’s sovereign debt crisis, when Greece carried out the biggest-ever bond restructuring, the nation never canceled a bill auction and continued to roll over the securities.

“The instrument class in itself has proven to be very safe,” David Schnautz, a fixed-income strategist at Commerzbank AG said from London on Tuesday. “While they should be safe from any haircut — which is not aimed for — they are subject to the same tail risk of Greece leaving the euro. The composition of investors may change, but overall it doesn’t seem that this should be a key event risk.”

A previous sale of six-month bills on Jan. 7 drew an average yield of 2.30 percent, up from 2.15 percent on Dec. 10. The average auction rate dropped to record-low 0.59 percent in October 2009 before climbing to 4.96 percent in June 2011, according to data compiled by Bloomberg. That compares with a rate of 7.83 percent set at an auction in February 2000, the highest on record in data starting that month.

Greece’s three-year notes rallied on Tuesday, rising for the first time in seven days, after Greek Finance Minister Yanis Varoufakis outlined plans to swap some debt owned by the European Central Bank and the European Financial Stability Facility for new securities.

Varoufakis indicated that the move would allow Greece to avoid imposing a formal reduction in the amount owed to creditors, according to a person who attended the meeting and asked not to be identified because they weren’t authorized to speak publicly.

Daniele Nouy, head of the European Central Bank’s Supervisory Board, said the ECB has told Greek lenders that they need to be cautious in their liquidity management.

“They should not take measures that could endanger their liquidity positions, the management of their liquidity situation,” Nouy said on Jan. 28 in Frankfurt. “They have to invest their treasury liquidity in highly liquid assets, in assets that can be accepted as collateral. That’s a basic recommendation from a supervisor in such circumstances.”

Greek securities have returned less than all but two of their euro-area sovereign peers this year, according to Bloomberg’s World Bond Indexes, amid snap elections in the nation and a new government that said it was seeking a debt writedown. They earned 1.4 percent through Tuesday, while Germany’s gained 2.1 percent, the indexes show. Only Luxembourg’s and Ireland’s returned less. [Bloomberg]