Greece Plans to Sell Global Dollar Bond by Early May (Update1)
March 31 (Bloomberg) -- Greece plans to sell a global bond in dollars in the next two months to help raise 11.6 billion euros ($15.6 billion) in funding requirements by the end of May after investors lost money on its most recent sale.
Greece needs to borrow a total of 32 billion euros this year, including May, Petros Christodoulou, director general of the Public Debt Management Agency, said today in a Bloomberg Television interview. He declined to say how big the dollar issue might be.
Seven-year notes sold by the government this week fell even after the European Union and the International Monetary Fund crafted an aid package that would be triggered should the nation be unable to raise sufficient cash from capital markets to cover its financing needs. Greece may pay about 13 billion euros more in interest on the debt it sells this year than it would have to had yields stayed at their pre-crisis levels relative to Germany’s, according to data compiled by Bloomberg and Credit Agricole Corporate and Investment Bank.
“A dollar bond sale means that they don’t have to go to the long end of the curve after they’ve sold” five-, seven- and 10-year debt this year, said Charles Diebel, senior fixed-income strategist at Nomura International Plc in London. “They may raise 7 billion euros in a three-year deal, leaving them 4 billion euros to raise in dollars to complete their May funding.”
Comments:
When, as a government treasury, you can no longer sell bonds in your own currency at reasonable yields, it is a signal that investors have lost faith in your "fiat", the promise made to honor commitments.
The fact that Greece's currency is the Euro is even more serious considering the Euro's heavy weight backers like Germany.
With offering bonds in US dollars, the Greeks are getting desperate, as they have also introduced currency risks into their budget plans.
Eventually, if America keeps borrowing, this problem could arise for the United States - the inability to borrow in your own currency at reasonable rates.
March 31 (Bloomberg) -- Greece plans to sell a global bond in dollars in the next two months to help raise 11.6 billion euros ($15.6 billion) in funding requirements by the end of May after investors lost money on its most recent sale.
Greece needs to borrow a total of 32 billion euros this year, including May, Petros Christodoulou, director general of the Public Debt Management Agency, said today in a Bloomberg Television interview. He declined to say how big the dollar issue might be.
Seven-year notes sold by the government this week fell even after the European Union and the International Monetary Fund crafted an aid package that would be triggered should the nation be unable to raise sufficient cash from capital markets to cover its financing needs. Greece may pay about 13 billion euros more in interest on the debt it sells this year than it would have to had yields stayed at their pre-crisis levels relative to Germany’s, according to data compiled by Bloomberg and Credit Agricole Corporate and Investment Bank.
“A dollar bond sale means that they don’t have to go to the long end of the curve after they’ve sold” five-, seven- and 10-year debt this year, said Charles Diebel, senior fixed-income strategist at Nomura International Plc in London. “They may raise 7 billion euros in a three-year deal, leaving them 4 billion euros to raise in dollars to complete their May funding.”
Comments:
When, as a government treasury, you can no longer sell bonds in your own currency at reasonable yields, it is a signal that investors have lost faith in your "fiat", the promise made to honor commitments.
The fact that Greece's currency is the Euro is even more serious considering the Euro's heavy weight backers like Germany.
With offering bonds in US dollars, the Greeks are getting desperate, as they have also introduced currency risks into their budget plans.
Eventually, if America keeps borrowing, this problem could arise for the United States - the inability to borrow in your own currency at reasonable rates.
PW, if the United States were not able to borrow in dollars, then in what currency would it be able to borrow?
ReplyDeleteMost likely, the borrowing currency would be that of the lending nation. It could be yen or yuan. Of course yuan presents certain complications as the Chinese currency does not float and is pegged to the US dollar. If Europe ever got its house in order, borrowing in Euros would be a possibility.
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