Spec_Trader
03-16-2010, 11:38 AM
BRUSSELS (Dow Jones)--Greek government officials on Tuesday expressed frustration with borrowing costs that remain stubbornly high despite budget reforms and promises of aid from euro-zone partner states.
Greece would find it hard to cope with borrowing costs if they stayed at current levels, Finance Minister George Papaconstantinou said Tuesday, adding that he expects his country's borrowing costs to decrease as its plan to tackle budget problems gains credibility.
"It's clear that we are not happy to be paying the kind of mark-ups and spreads that we're paying at the moment," he said. "But as we have stated all along it's a question of rebuilding credibility and it's very clear now that this credibility is being rebuilt."
The finance minister's comments dashed expectations that Greece would launch another major bond issue as early as this week to help cover funding gaps over the next two months.
"I don't think Greece will come out with a bond this week, perhaps next week," said Jens Peter Sorensen, chief analyst at Danske Markets in Copenhagen.
Currently Greece pays a yield premium of around three percentage points over German bunds. This means that investors demand around twice as high a yield for holding Greek bonds than Germany pays to its investors. Tuesday afternoon Greek 10-year bonds were trading at a yield of 6.25% compared with Germany's 3.15%.
A Greek government official, speaking to Dow Jones Newswires last week, said Greece needs the yield spread between 10-year Greek and equivalent German bonds to tighten to around two percentage points before Greece must redeem some EUR22 billion of bonds in April and May.
Greece has a 6.25% coupon on its most recent EUR5 billion 10-year bond issue maturing in June 2020. The high interest rate means the Greek government is shelling out a mammoth EUR312.5 million per year to investors on the issue.
By way of comparison, Germany pays a 3.25% coupon on its government bonds maturing in January 2020, with debt-servicing costs amounting to EUR162.5 million per year for an equivalent amount of debt.
"There is a strong vocal support for Greece. The question is what the price is," Danske's Sorensen said. "If they have to pay a coupon above 6%, it's becoming very difficult," he said, referring to the coming redemptions in April and May.
Papaconstantinou declined to be pinned down on plans for issuing debt. "I never make public pronouncements on dates, schedules, specific volumes of debt issuances," he told reporters. "The market is quite volatile, our spreads are quite volatile, so we take our decisions based on how we see the market."
Greek Prime Minister George Papandreou, visiting in Budapest Tuesday, said Greece shouldn't be forced to borrow at inflated rates of interest.
"We have said we are not asking for money, but we do need some form of instrument to intervene and make sure that we borrow at rates which are similar to the other countries' [rates] in the euro zone, which are not too expensive for Greece."
Monday and Tuesday in Brussels, European Union finance ministers have been discussing the technical aspects of a bailout plan that could be used to help Greece overcome its debt problems if required. Ministers said, however, that they haven't made any final decisions.
Those aspects include which countries would participate in the plan, its pricing structure and duration and what mechanisms would trigger its implementation, Papaconstantinou said.
The points haven't been finalized, he said, "but I think based on yesterday's decision and willingness of the Eurogroup to take this further, they will be made more explicit in [the] next few days."
The Eurogroup consists of the finance ministers from the 16 countries that use the euro.
Ratings agency Standard & Poor's Corp. Tuesday affirmed Greece's BBB+/A-2 rating and removed Athens from a negative credit watch.
-By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738; jethro.mullen@dowjones.com
http://online.wsj.com/article/BT-CO-20100316-708495.html?mod=WSJ_World_MIDDLEHeadlinesEurope
Greece would find it hard to cope with borrowing costs if they stayed at current levels, Finance Minister George Papaconstantinou said Tuesday, adding that he expects his country's borrowing costs to decrease as its plan to tackle budget problems gains credibility.
"It's clear that we are not happy to be paying the kind of mark-ups and spreads that we're paying at the moment," he said. "But as we have stated all along it's a question of rebuilding credibility and it's very clear now that this credibility is being rebuilt."
The finance minister's comments dashed expectations that Greece would launch another major bond issue as early as this week to help cover funding gaps over the next two months.
"I don't think Greece will come out with a bond this week, perhaps next week," said Jens Peter Sorensen, chief analyst at Danske Markets in Copenhagen.
Currently Greece pays a yield premium of around three percentage points over German bunds. This means that investors demand around twice as high a yield for holding Greek bonds than Germany pays to its investors. Tuesday afternoon Greek 10-year bonds were trading at a yield of 6.25% compared with Germany's 3.15%.
A Greek government official, speaking to Dow Jones Newswires last week, said Greece needs the yield spread between 10-year Greek and equivalent German bonds to tighten to around two percentage points before Greece must redeem some EUR22 billion of bonds in April and May.
Greece has a 6.25% coupon on its most recent EUR5 billion 10-year bond issue maturing in June 2020. The high interest rate means the Greek government is shelling out a mammoth EUR312.5 million per year to investors on the issue.
By way of comparison, Germany pays a 3.25% coupon on its government bonds maturing in January 2020, with debt-servicing costs amounting to EUR162.5 million per year for an equivalent amount of debt.
"There is a strong vocal support for Greece. The question is what the price is," Danske's Sorensen said. "If they have to pay a coupon above 6%, it's becoming very difficult," he said, referring to the coming redemptions in April and May.
Papaconstantinou declined to be pinned down on plans for issuing debt. "I never make public pronouncements on dates, schedules, specific volumes of debt issuances," he told reporters. "The market is quite volatile, our spreads are quite volatile, so we take our decisions based on how we see the market."
Greek Prime Minister George Papandreou, visiting in Budapest Tuesday, said Greece shouldn't be forced to borrow at inflated rates of interest.
"We have said we are not asking for money, but we do need some form of instrument to intervene and make sure that we borrow at rates which are similar to the other countries' [rates] in the euro zone, which are not too expensive for Greece."
Monday and Tuesday in Brussels, European Union finance ministers have been discussing the technical aspects of a bailout plan that could be used to help Greece overcome its debt problems if required. Ministers said, however, that they haven't made any final decisions.
Those aspects include which countries would participate in the plan, its pricing structure and duration and what mechanisms would trigger its implementation, Papaconstantinou said.
The points haven't been finalized, he said, "but I think based on yesterday's decision and willingness of the Eurogroup to take this further, they will be made more explicit in [the] next few days."
The Eurogroup consists of the finance ministers from the 16 countries that use the euro.
Ratings agency Standard & Poor's Corp. Tuesday affirmed Greece's BBB+/A-2 rating and removed Athens from a negative credit watch.
-By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738; jethro.mullen@dowjones.com
http://online.wsj.com/article/BT-CO-20100316-708495.html?mod=WSJ_World_MIDDLEHeadlinesEurope