Tuesday, April 13, 2010

Greek Headline Manipulation?

Greece sold 26-week and 52-week bills in an auction designed to prove that the latest rescue plan has "worked."

"Greece’s auction of Treasury bills drew stronger demand than at a previous sale, signaling renewed investor appetite at the government’s first offering of debt since winning an aid package from the European Union.
Greece sold 780 million euros ($1.06 billion) of 26-week bills at a yield of 4.55 percent, attracting bids for 7.67 times the securities offered, the nation’s Public Debt Management Agency said today in Athens. It also offered 780 million euros of 52-week securities at a yield of 4.85 percent, with a bid-to-cover ratio of 6.54 times."

Now - what that means is that for the 26-week bill there were 7.67 times as many bids as there were bills offered.  The January 26-week auction in Greece had a bid to cover ratio of 4.9x, and had averaged 6.2x in 2009.  The January 52-week auction had a bid to cover ratio of 3.1x, and averaged 5x in 2009.

Thus, it appears that this auction had very strong demand, showing increased bid-to-cover ratios, which is exactly what Greece and the E.U. had hoped for.

There's just one hitch: a former colleague of mine writes, emphasis mine: 

"However both auctions are already trading below auction price slightly (6m priced at 97.75 and traindg 97.381, 1yr priced at 95.33 and traqding at 94.638). You can see these bills on Bberg with GTB Corp . I'm not sure where the other 600% of bids are now that its below auction price, which makes me think that the bids were there for nice headlines."

In other words, if the auctions were really more than 6 times oversubscribed, where are all the buyers now?  The paper shouldn't be trading lower already...


But What do I Know? said...

I guess this is a bit of "Watch what they do, not what they say." Thanks for pointing it out, KD.

I-Man said...

Its the shadow bailout... the "Invisibid".