5 Mar 2010

Demand high for bond issue by Greece

11:57 am on 5 March 2010

Strong demand is reported for the latest government bond issue by Greece. The 5 billion euro ($US6.8 billion) issue was oversubscribed.

However, the government had to offer a high rate of interest to attract investors. Reports suggest the latest issue pays a yield of about 6.5%.

On Wednesday, Greece announced an austerity package worth 4.8 billion euros in order to cut its debt levels.

The BBC reports there were concerns that Greece's high levels of debt might lead to investors shunning government debt. Such fears proved unfounded.

Greece needs to raise money in the international capital markets in order to service its high debt levels, currently standing at about 300 billion euros.

It has to raise 20 billion euros in order to repay debt maturing in April and May.

Greece has already pledged to reduce its deficit from 12.7% - more than four times eurozone rules - to 8.7% during 2010, by freezing public sector pay, raising taxes and changing the pension system.