Unfavorable markets lead to Greek bond sale missing estimates

By Lukanyo Mnyanda & David Goodman

Greece raised 1.5 billion euros ($2.04 billion) in a debt sale that fell short of analyst estimates on size and yield as it took place amid a selloff in higher-yielding bonds across the euro area.

In its second offering in three months, the country that sparked Europe’s sovereign debt crisis sold three-year notes via banks at an average yield of 3.5 percent. That’s a higher borrowing cost than forecasts earlier this week of about 3 percent from HSBC Holdings Plc and Royal Bank of Scotland Group Plc. RBS had also estimated the size of the sale would reach 3 billion euros.

Portugal’s bonds led a selloff in securities from the region’s so-called periphery nations this week on instability in that nation’s banks. Greece’s transaction went ahead “despite very unfavorable conditions in international markets and especially in periphery, today and yesterday,” the Finance Ministry in Athens said in a statement.

“It points at a fragile position of the issuer in terms of being able to secure a reliable market access,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. Greece had to “accept halving its initial issuance target despite being a syndicated offer, and also had to accept a higher guidance than was initially thought,” he said.

Greece had planned to sell as much as 3 billion euros of debt, a government official said last week, asking not to be named because the details hadn’t been announced at the time.

Greek five-year notes fell for a third day, pushing up the yield by 12 basis points, or 0.12 percentage point, to 4.34 percent at 2:46 p.m. London time. That’s still down from 4.95 percent when the securities were issued in April in...