Greece sells $1.5B in bonds

Greece successfully sold $1.56 billion in bonds on Tuesday, raising hopes that the indebted nation will not require anInternational Monetary Fundbailout.

The country raised $1.56 billion US in a treasury bill auction, officials said Tuesday. But the interest rate offered for six-month and one-year Greek bonds was much higher than in previous offerings.

The 12-month bond was sold at 4.85 per cent (compared to 2.2 per cent in January) and the six-month at 4.55 per cent (compared to 1.3 per cent in January).

The Greek government is struggling to repay more than $70 billion worth of loans that come due before May. The centre-left Greek government has said it cannot go on paying elevated market interest rates as it seeks to roll over its debt obligations and avoid default or a bailout.

"Our aim remains and I believe we will continue to do it to continue to freely borrow from the markets, as we did today with the issue of six- and 12-month treasury bills," Finance Minister George Papaconstantinou said.

The bond offering is only a drop in the bucket of Greece's total debt load, but the fact that both issues were six and seven times oversubscribed meaning far more people were willing to buy the bonds at those rates than Greece was able to sell is a positive.

Investors reassured

Last week, European Union and IMF officials agreed to bankroll a $54.3-billion loan to Greece to keep the country afloat if necessary.

"I stress that the Greek government has not requested the activation of this mechanism, despite that fact that it is immediately available, if required," Papaconstantinou said.

The IMF pledge appears to have reassured investors that Greece will not default on its loans this year, but how much longer they can continue paying elevated lending rates is a burning question.

"Today's successful Greek short-term debt auctions will further ease fears about Greece meeting its near-term financing needs, but it still faces an uphill struggle to return the public finances to a sustainable position," said Ben May, an economist at London-based Capital Economics Ltd.

Greece's budget deficit is forecast to hit 13 per cent of GDP this year. EU rules have a limit that deficits can be no more than three per cent of economic output for an extended period, so Greece implemented a series of harsh austerity measures last month.