Greece will try to raise €1.5 billion via an auction of 3-month government bond on April 20th as it faces stubbornly high borrowing costs that may force it ask for aid from its euro zone peers and the IMF.
Following a sale this week in which Athens paid far higher than usual for short-term debt, the auction precedes a trip by Greek officials to the United States to drum up support for a potential dollar denominated bond but could reinforce a growing market view that Greece has few other options than outside help.
The Mediterranean state asked to start talks with European officials and the International Monetary Fund yesterday, and investors are closely watching whether it can raise enough to service about €12.6 billion in debt coming due by May.
Tuesday's auction is meant to address the first chunk - €1.58 billion of 3-month bonds maturing April 23rd. Greece must also raise €11 billion more to roll over a 10-year euro bond and make debt coupon payments next month.
But worries over its capacity to service a debt load that is expected to exceed annual economic output by a fifth this year have hammered its bonds, driving yields to prohibitive levels.
That was already evident when the overborrowed euro zone member paid a yield of 1.67 per cent in January to borrow 3-month money, more than quadruple the 0.35 per cent it paid in October 2009 before its debt crisis exploded.
European Union finance ministers said Greece does not have an immediate plan to trigger a rescue package even as the country's bond yields rose to the highest since before the bailout plan was announced.
Greek 10-year yields increased to 7.255 per cent today, approaching the rate before the €45 billion rescue package for the nation was unveiled on April 11th.
Spanish finance minister Elena Salgado, whose government holds the rotating EU presidency, said ministers won't decide on any further action at a two-day meeting in Madrid that began today.
"This seems a reluctant, foot-dragging exercise," Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a telephone interview yesterday. "The market wants closure and it's not getting it."
The euro region is aiming to prevent the first default of a member nation that would risk sending shockwaves through the rest of the currency area. Greece needs to raise €11.6 billion by the end of May, and Prime Minister George Papandreou has said borrowing at current market interest rates is "unsustainable."
"We are not expecting any decision today on Greece," Mr Salgado told reporters in Madrid before the meeting. EU economic affairs commissioner Olli Rehn called the April 11th aid agreement for Greece a "solid decision."
The fiscal crisis risks spreading to other nations, with Portuguese bonds today falling to the lowest in almost two months. The yield on Portugal's 10-year debt rose 5 basis points to 4.445 per cent at earlier. A basis point is one hundredth of a percentage point.
Mr Papandreou yesterday asked for a meeting with the EU, the International Monetary Fund and the European Central Bank, which agreed to back the rescue package for Greece.
Talks will begin in Athens on April 19th. "It's a matter of preparing a joint program of conditionality and financing if needed and if required," Mr Rehn said today in Madrid.
Greece will begin a presentation to US investors about a possible debt sale on April 20th, Market News reported, citing comments by Petros Christodoulou, managing director of the Greek Public Debt Management Agency, to Japanese news service Jiji News.