New Global Effort To Patch European Insolvency Holes Buys One More Day

Tuesday, January 11, 2011
By Paul Martin

by Tyler Durden

Europe is now literally living day to day. After last night it was announced that Japan is joining China in purchasing a substantial portion of European debt, using its FX reserves to buy up to 20% of European issuance and thus becoming simply the latest selfish trade surplus country doing all it can to keep its key export partner afloat (to the detriment of USD bond purchasing, confirming the Fed’s monetization of debt will never end), today that ultimate backstop, the ECB, has for the second day in a row been purchasing Portuguese bonds to make sure there is no collapse in the sovereign debt market. The good news: Greece managed to place €1.95 billion in 6 month Bills… at the ridiculous rate of 4.9% and 3.4 Bid to Cover, which nonetheless happened to be an deterioration in both rate from the previous November 9 Bill auction, printing at 4.82%, and had a much higher 5.15 bid to cover.

From the AP:

Greece on Tuesday raised €1.95 billion (US$2.5 billion) in a treasury bill auction, easing concerns in the troubled eurozone country a day after bond yields hit a record high.

The country’s Public Debt Management Agency said the 26-week bill auction for the starting amount of €1.5 billion was oversubscribed 3.4 times and sold at a yield of 4.9 per cent.

On Monday, Greek bond yields touched another record high, exceeding the 10-year equivalent German yield by 10 percentage points for the first time, amid a broader flare-up in Europe’s debt crisis.

Tuesday’s debt auction was considered an important test of market sentiment. The previous auction of 26-week treasury bills, on Nov. 9, resulted in a yield of 4.82 per cent.

Greece has launched a major effort to cut borrowing costs in exchange for bailout loans worth €110 billion from the IMF and other countries using the euro. Despite being in recession, it’s ambitious deficit-reduction targets broadly met last year.

The government insists it wants to return to long-term bond markets sometime this year.

It has gotten so surreal that G-Pap has even said that “EU issues are adding to Greek credit rating problems.” You read that right – the country that exists only due to the EU’s magnanimity (and M.A.D. arrangement), has now decided it has all the leverage to demand that the EU gets its house in order or else.

In the meantime Greece also announced that Bernanke’s plan to drown the world in a tsunami of inflation is at least working six thousand miles away, after Greek consumer inflation increased 5.2% in December compared to 4.9% in November. Oddly enough real interest rates in Greece may actually be some of the lowest in the world soon enough…

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