Important developments today:
1. Greece sells €1.56 billion ($2.12 billion) in short term Treasuries
2. U.S. trade deficit widens
Greece attracts strong demand for its new debt sale. The Greek government sold €1.56 billion ($2.12 billion) worth of short-term Treasury securities Tuesday, in a successful first attempt to test investor confidence since details of the EU/IMF financial package were unveiled over the weekend. Greece’s auction of T-bills met with strong demand, but the government had to offer very high coupon rates contrasted with its previous short-term debt sales. The country is hoping the Euro Area/IMF package will reassure investors that it can fund its short-term financing requirements, and eventually drive interest rates down for future bond sales. The latter, importantly, so that plans to cut the budget deficit will remain on track, without escalating the interest bill.
The Greek Public Debt Management Agency sold €780 billion ($1.06 billion) apiece of 26-and 52 week Treasury bills compared to an initial target of €600 billion of each. The securities were uniformly priced at 4.55% and 4.85%, while the offerings were 7.67 times and 6.54 times oversubscribed, respectively. Yields were slightly below those on existing Greek bills of a similar maturity, but still more-than double those that prevailed at the last auction of similar debt in January.
Source: Department of Commerce
U.S. trade deficit widens as imports expand. The U.S. deficit on merchandise trade widened by 4% (m/m) in February, to a seasonally adjusted $54.2 billion (F.A.S.–C.I.F.), with imports up 1.4% (m/m) and exports unchanged. As economic recovery gains traction, the demand for foreign goods is originating from businesses replenishing depleted inventories, as well as strengthening household purchases. While higher prices for crude oil have had an impact on the oil bill, which grew 1.6% (m/m), the overall deficit excluding petroleum and crude imports was up 6.5%, pointing to the broad based rebound in import demand. The U.S. economy generated 162,000 jobs in March, the most in three years, and general resurgence of confidence regarding employment conditions and the economic recovery are translating into growth in consumer spending and business investment.
When measured in volume terms (i.e. corrected for changes in trade prices), U.S. exports eased to a 20.7% pace in February (saar) from 35% during the final quarter of 2009; similarly import volumes slowed to growth of 18% from 36% in late 2009, suggesting that the contribution of net-exports to GDP growth for the first period of 2010 should be leaning to the positive side