Greece passed its first key test of investor confidence with the successful sale of short-term treasury bills.
OK, bills, short term debt instruments.
The embattled Greek government raised an estimated €1.6bn (£1.3bn) in an overscubscribed bond issue
Err, no, bonds are long term debt instruments. They\’re not the same thing.
Greece\’s recovery plan was working even if Athens had to pay rates of return that came in at 4.55% for the six-month bonds and 4.85% for the 12-month ones:
No, these are bills, not bonds.
This might sound like mere pedantry (what, from Timmy?) but actually it isn\’t. Bills are less than 12 months maturity, notes are 2 to 10 year and bonds are longer than that. OK, still mere pedantry….except, when you\’re looking at the actual debt burden a country faces you also need to look at the maturity of that debt burden.
How much of the debt do you need to refinance and when? If all you can issue at reasonable interest rates are bills then you\’ve only delayed the crunch of refinancing by a few months. If notes by a few years and if bonds, well, you\’ve kicked it far enough down the road that it\’s all someone else\’s problem. Note that interest rates are (normally) higher for bonds than notes and for notes than bills.
And Greece\’s problem is that it cannot really issue bonds at anything like an interest rate it wishes to pay. Which means, a This Time is Different shows, that as earlier bond and note issues mature they\’re refinancing them with bills (and some notes) and thus reducing the average maturity of the entire debt. Which means again that in the next few years there will be even more that they\’ve got to refinance. Not just the bonds and notes maturing next year and the year after but also all those bills they\’ve issued this year as well.
The very distinction between bonds notes and bills is crucial to understanding the refinancing spiral. So a leading newspaper like The Guardian should really make those distinctions: always assuming their reporters know the distinctions and don\’t just think that they\’re synonyms. Might just let them get away with it in a column or a news piece, but really, not in the business section.