T-bill yields fall to record lows
Wednesday’s auction of 3-month treasury bills by Greece’s Public Debt Management Agency (PDMA) produced a record-low yield of 0.095 percent, which, combined with the rally in other Greek debt, including the 10-year bond yield dropping below 2 percent, has further improved prospects for the sustainability of Greece’s hefty debt, adding to the positive signals sent out by markets before and after the July 7 election.
PDMA auctioned 625 million euros worth of 13-week treasury bills and the total amount offered by bidders was 993 million, for a coverage ratio of 1.59. This was somewhat lower than the 1.65 ratio in the previous auction on July 10, but the amount PDMA finally accepted was the same (812.5 million) and the yield significantly lower than the previous auction’s 0.23 percent.
The significant yield decline has raised expectation that Greek debt paper will soon offer unprecedented negative yields, joining the 15 trillion in globally issued debt with negative yields.
Last week, an auction of 6-month T-bills yielded 0.15 percent, down from 0.23 percent in the previous July 3 auction, while back in June, a 12-month T-bill auction yielded 0.47 percent, down from 0.95 percent in the previous auction. All these yields on 3-, 6- and 12-month T-bills are historic lows.
Analysts note that, if this positive trend in the Greek bond market continues – combined with a new quantitative easing program by the European Central Bank, which, although it will not directly concern Greece, will help Greek securities take advantage of a positive market – it is only a matter of time before Greek debt yields enter negative territory.
Yesterday, the 10-year Greek bond yield ended at 1.998 percent, close to the historical low of 1.938 percent.
The whole bond rally is being helped by investors who are anxious about the global economic prospects after the latest bouts in the trade war. In this environment, it is not surprising that some analysts predicted a 10-year bond yield of 1.75 percent at the end of the year.
