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UPDATE 2-Greece passes T-bill sale test; euro, banks stocks rise

 * Greece raises 1.625 bln euros in 6-month T-bills
 * First borrowing test since May IMF/EU bailout
 * Yield higher, bid-cover ratio 3.64 versus 7.67 in pvs sale
 * Greek bank shares up 4.5 pct, add gains after auction
 * Euro ticks higher vs dollar
 
 (Recasts, adds analyst comment, market reaction)
 By George Georgiopoulos
 ATHENS, July 13 (Reuters) - Greece passed its first
borrowing test on Tuesday since a giant EU/IMF funding deal in
May, sending bank stocks and the euro higher after it easily
sold 1.625 billion euros ($2.03 billion) of 6-month T-bills.
 The debt-ridden country managed to get market funding at a
slightly cheaper cost than the 5.0 percent it pays to borrow
under the 110 billion euro loan that the European Union and
International Monetary Fund put in place to calm a crisis that
has shaken the euro zone.
 But the auction highlighted Greece still had some way to go
in convincing investors. The yield was higher than a previous
similar sale and what other troubled euro zone economies have
paid recently, and demand, while solid, was lower.
 "We were expecting a good result, and it's good for Greece
and the euro, but (Greece) has a long way to travel, as its
economic challenges are pretty severe. It's going to take years
to figure this out, not just one auction," said Paul Robinson, a
currency strategist at Barclays Capital in London.
 Less oversubscribed than a previous auction in April, the
sale produced a yield of 4.65 percent versus 4.55 percent in an
April 13 sale of similar duration paper, the outcome broadly in
line with expectations.
 Tuesday's bid-to-cover ratio was slightly better than
forecast at 3.64 -- though less than half the 7.67 times
oversubscription in the previous April auction.
 "We are happy with the outcome of the auction," debt agency
(PDMA) chief Petros Christodoulou told Reuters. "We were
pleasantly surprised with the foreign participation."
 Markets had expected the issue would be mostly picked up by
Greek banks. Christodoulou would not elaborate on how much was
taken up by foreigners.
 
 COSTLY BORROWING
 Punished for fiscal profligacy, Greece is paying for
six-month paper 8 times what it costs Germany to borrow for one
year DE1YT=RR, highlighting the struggle it faces to restore
market confidence.
 It is also paying much higher costs than other euro zone
periphery countries facing fiscal problems although their costs
have also been rising.
 Portugal sold six-month T-bills at 1.947 percent on July 7,
while Spain had to pay a yield of 1.577 percent on June 22 for
six-month paper.
 "It's a marginally positive result. It could have gone
worse. On the other hand, Greece is sheltered from any fiscal
default over at least the next six months, or two years," said
Citigroup economist Giada Gianni.
 "Since it's a very short-term maturity, it does not reflect
markets' expectations in terms of Greece's development in the
next years. It's very difficult to say whether it reflects
market confidence in Greece," she said.
 Still, being able to tap markets for six-month funds was
enough to give battered Greek bank shares a boost, driving the
sector's index .FTATBNK 4.5 percent higher with the euro
gaining some ground against the dollar.
 The debt agency accepted an additional 375 million euros in
non-competitive bids, bringing total proceeds to 1.625 billion
euros to roll over maturing short-term paper. Settlement date is
July 16.
 Another auction of three-month paper will follow next week
to roll over 2.4 billion euros of maturing T-bills.
 PDMA provided the following details:
*********************************************************
                              26-WEEKS
 AUCTION DATE         July 13             Apr 13
 ISSUE DATE           July 16             Apr 16
 MATURITY             Jan 14           Oct 15, 2010
 AMOUNT AUCTIONED     1.25 bln            600 mln
 TOTAL BIDS           4.546 bln          4.602 bln
 -Competitive         4.154 bln          4.372 bln
 -Non-competitive       392 mln           230 mln
 COVERAGE RATIO         3.64               7.67
 TOTAL ACCEPTED AMOUNT  1.625 bln          780 bln
 UNIFORM YIELD            4.65%            4.55%
 CUT-OFF PRICE           97.703           97.752
 CUT-OFF RATIO           64.38%           18.67%
 SECOND-DAY BIDS
 AUTHORISED AMOUNT      375 mln           180 mln
 -----------------------------------------------------  
 source: PDMA
(additional reporting by Renee Maltezou, Harry Papachristou
in Athens; Reporting by George Georgiopoulos; Editing by Ruth
Pitchford)


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