By Matthew Brown April 13 (Bloomberg) -- Greek bonds rose for a third day as the government sold more Treasury bills than it initially planned, signaling improving appetite for the government’s debt. The advance pushed the yield on the two-year note down to near the lowest in a week. The yield dropped the most on record yesterday following the announcement of a European Union-led agreement to provide as much as 45 billion euros ($61 billion) of aid to Greece. The government sold 1.56 billion euros of 26- and 52-week bills today in its first debt offering since winning the rescue pledge. The Public Debt Management Agency said last week it planned to sell a combined 1.2 billion euros of bills. “The sale went swimmingly well,” said Marc Ostwald, a strategist at Monument Securities Ltd. in London. “Greek bonds are a little firmer, but this isn’t the big test of demand for Greek debt. That is likely to be the dollar sale later this month or early May.” Greek two-year yields fell 30 basis points to 5.99 percent as of 11:30 a.m. in London. The 4.3 percent security due March 2012 climbed 0.52, or 5.2 euros per 1,000-euro face amount, to 97. The 10-year yield dropped 12 basis points to 6.68 percent. Greece sold 780 million euros of 26-week bills at a yield of 4.55 percent, with bids for 7.67 times the securities offered, the debt 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. Dollar Bond Prime Minister George Papandreou needs to raise 11.6 billion euros by the end of May to cover maturing debt, with another 20 billion euros required by year-end to pay interest and finance this year’s deficit. Greek debt chief Petros Christodoulou said on March 31 that Greece plans to sell a global dollar bond by early May. Last week the government estimated its 2009 shortfall to be 12.9 percent of gross domestic product, the biggest in the euro’s history and more than four times the EU’s 3 percent limit. The previous forecast was 12.7 percent. Yields on Greek bonds rose last week as confidence in the nation’s assets withered. The extra yield investors demand to hold the country’s 10-year bonds instead of German bunds, the region’s benchmark government securities, climbed to 442 basis points on April 8, the highest since 1998. The Greek-German spread averaged about 65 basis points, or 0.65 percentage point, in the five years through November, before concern deepened that the nation’s deficit would soar. Greek-German Spread The spread today was 344 basis points, from 349 basis points yesterday. The yield on the bund was little changed at 3.18 percent, and the German two-year note yielded 0.99 percent, also little changed from yesterday. Deteriorating sentiment toward Greek debt led to the lowest demand in a year at 26- and 52-week bill sales in January. That’s when the Public Debt Management Agency raised 3.7 billion euros from the auctions, which included a 13-week security. The 26-week bill drew bids for 4.9 times the amount of securities offered on Jan. 12, compared with an average bid-to- cover of 6.2 times in 2009, according to data compiled by Bloomberg. The ratio at the 52-week sale was 3.1 times, below last year’s average of 5 times, the data showed. Demand for the 13-week bills was also less than the average in 2009. The 52-week bills were sold at a yield of 2.2 percent at the January auction, compared with an average of 1.62 percent in the previous four auctions, Bloomberg data showed. The securities yielded 7.48 percent last week. To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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