Greece Sells Bills, but Prospects Are Dim

By DAVID JOLLY

Greece easily sold a block of three-month securities on Tuesday, and at a lower interest rate than many had forecast. But its long-term prospects worsened amid skepticism that the country could pull itself out of a financial hole without drawing on aid from the European Union and the International Monetary Fund. 

The country’s Public Debt Management Agency said in a statement that it had sold 1.95 billion euros ($2.6 billion) of 13-week Treasury bills. It said demand for the bills exceeded the supply on offer 4.6 times, showing healthy demand.

While the 3.65 percent interest the government is paying is nearly a full percentage point below what the most pessimistic analysts had predicted, it is more than double the 1.67 percent it paid Jan. 19 in a similar auction. Last week, the debt agency sold 52-week bills yielding 4.85 percent and 26-week bills yielding 4.55 percent.

Greece has the highest borrowing costs in the 16-nation euro zone. Market confidence was dented last autumn when the incoming Socialist government of Prime Minister George A. Papandreou announced that its predecessor had vastly understated the scale of its financial problems.

While there was little doubt in the market that Greece would be able to pull off a sale of short-term debt, investors remain unconvinced that the government can raise the roughly 10 billion euros it needs by the end of May. Greek officials are to meet on Wednesday with teams from the European Union and the International Monetary Fund to discuss aspects of a proposed aid package of as much as 45 billion euros.

Reflecting the uncertainty, yields on the Greek government’s benchmark 10-year notes rose eighteen-hundredths of a point to 7.85 percent, and the yield gap, or spread, over comparable German notes rose to a record 4.76 percentage points. That gap reflects the interest premium investors demand to hold the riskier Greek debt.

Underscoring the risks to bond buyers, the government statistics agency said in Athens that the unemployment rate rose in January to 11.3 percent, from 10.2 percent in December. Economists fear that government austerity measures could lead to a cycle of job losses and falling tax revenue, further narrowing the state’s room to maneuver.