Tuesday, April 20, 2010

Investors Cautious Ahead of Greek Auction [wsj]

LONDON—Concerns that Greece might need almost twice as much aid than it has already been promised are keeping nerves alive for trading in the euro and Greek bonds, while a fresh debt issue by the country later in the day will offer another important test of investors' faith in the rescue package.

Market stress started to build late Monday, when European Central Bank board member Axel Weber said he thought Greece might need up to €80 billion ($107.9 billion) in aid. So far, euro-zone finance ministers and the International Monetary Fund have pledged only €45 billion for this year.

Later Tuesday, Greece is expected to auction €1.5 billion in three-month Treasury bills. The results of that auction are due shortly after 0900 GMT.

Analysts at French bank Societe Generale said that paying a high interest rate on this debt for just three months "should not do Greece's finances too much harm." However, the auction remains an important test of the country's ability to raise funding.

In addition to the fresh auction, Greece is expected to pay back its April 2010 bond later Tuesday. A successful redemption, along with a successful issue "should show that Greece is able to access market funding," said analysts at Commerzbank. Still, that "cannot mask the daunting medium-term challenges that lie ahead," said Christoph Rieger, a strategist at the bank. link

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