Greece to auction €1.25 billion ($1.58 billion) in 6-month treasury bills next week

Greece to sell 6-month treasury bills on July 13

ATHENS, Greece — Greece said Friday it will auction euro1.25 billion ($1.58 billion) in 6-month treasury bills next week, in its first effort to borrow from international markets since receiving a vital international bailout in May.

The public debt management agency said the bills will be auctioned on July 13, with the sale settled on July 16. The government has said it will auction 12- and 3-month bills later this month.

Debt-hobbled Greece narrowly avoided defaulting on its loans in May, when it received the first installment of a euro110 billion ($139 billion) rescue package from fellow European Union countries using the euro currency and the International Monetary Fund.

Athens used the funds to pay off expiring bonds, after soaring interest rates demanded by edgy international investors effectively blocked the country from continuing to raise cash through government bond issues.

To secure the EU and IMF loans, the center-left government took painful austerity measures and overhauled its pension and labor systems, angering labor unions and triggering a series of strikes and protests.

The country last issued short-term debt on April 20, raising euro1.95 billion through 3-month treasury bills in an auction that was four times oversubscribed. But Athens had to pay a high yield of 3.65 percent, double what it offered during its previous 3-month issue.

Finance Minister George Papaconstantinou has said Greece hopes to return to selling longer-term bonds on international markets in 2011.

The government also says it is on track to meet its target of reducing the deficit this year, which has fallen 40 percent in the first five months of the year, and dismissed any talk of the country defaulting on, or restructuring its debt.

Greece’s estimated budget gap stood at 13.6 percent of gross domestic product in 2009, and the government has pledged to reduce it to 8.1 percent by the end of 2010.

The country has been in recession for more than a year. But the government says it has hopes the economy will contract at a slower pace than the 4 percent predicted for this year.

This week, Greece’s parliament approved sweeping pension and labor reforms that will raise retirement ages to 65 — adding 15 years’ work for some women — and facilitate firings.

Government spokesman Giorgos Petalotis said the law would secure the pension system’s long-term viability.

“We must all understand that there would have been no pensions had we not tackled this major issue,” he said Friday.

Analysts at IHS Global Insight said the passing of the reforms “reduces the possibility of a debt structuring in the future, but risks still remain high.”

In a note Friday, the analysts said the Greek government can now “concentrate on future steps to reduce the country’s debt and curb the deficit” and that the success of the reforms will increase Greece’s credibility in international markets.

In afternoon trading Friday, the key spread between Greek 10-year government bond rates and their benchmark German equivalents was around 7.7 percentage points. That means that were Greece to issue bonds now, it would likely have to pay interest rates of nearly 11 percent.