Greece sold €2 billion of floating-rate notes privately to banks eight days after Fitch Ratings downgraded the nation's debt as the government struggles to cut the EU's largest budget deficit.
The securities, which mature in February 2015, will yield 250 basis points, or 2.5 percentage points, more than the six- month euro interbank offered rate, or Euribor, sources said. That's 30 basis points higher than a similar-maturity Greek fixed-rate bond when converted into a floating rate of interest.
Greek bonds have fallen in the past week, with two-year note yields rising by the most in more than a decade on December 8th, when Fitch cut the nation's credit rating to BBB+, the lowest in the euro zone, citing the "vulnerability" of the nation's finances.
Prime minister George Papandreou has been unable to convince investors he can reduce a deficit the government says will rise to 12.7 per cent of gross domestic product this year, after the economy shrank 1.7 per cent in the third quarter.
Greece's bonds are falling after Dubai reignited the potential for defaults when state-owned Dubai World said on December 1st it wanted to restructure $26 billion of debt. The premium, or spread, investors demand to hold Greek 10-year bonds instead of
German bunds, Europe's benchmark government securities, was at 250 basis points today, the highest since April 2nd.
The participating banks in yesterday's private placement were National Bank of Greece , Alpha Bank, EFG Eurobank Ergasias, Piraeus Bank and Banca IMI , the bankers familiar with the transaction said.
In a private placement, issuers offer securities directly to chosen private investors as opposed to selling them through an auction or via a group of banks.
Mr Papandreou pledged in a speech two days ago to begin reducing the nation's debt, set to exceed 100 per cent of GDP this year, from 2012.
Bloomberg