By John Glover and Matthew Brown Feb. 24 (Bloomberg) — Greece may be playing “a game of chicken” over a planned 10-year bond sale as it negotiates with European Union officials on budget targets, according to Ignis Asset Management. The longer Greece delays the note issue, the more likely it can win concessions on the severity of spending cuts demanded by its neighbors to reduce the region’s largest deficit, said Stuart Thomson , who helps oversee more than $100 billion at Ignis in Glasgow. The Greek debt agency said Feb. 2 the country will probably sell bonds by March. “There’s a game of chicken going on,” said Thomson, who is “underweight” Greek bonds. “If Greece turns up at the next European finance ministers’ meeting and says it’s about to run out of money, it can avoid demands for further budget cuts.” EU and European Central Bank officials are in Athens this week to verify that budget cuts, which provoked a 24-hour general strike today, are being implemented. Greece Finance Minister George Papaconstantinou said yesterday his country is committed to meeting the goals to trim the shortfall by 4 percentage points of gross domestic product this year and to bring the country within the EU’s 3 percent limit in 2012. Greece will probably sell as much as 5 billion euros ($6.8 billion) of 10-year bonds by next month, Spyros Papanicolaou , the former head of Greece’s Public Debt Management Agency, said in an interview before he left his position. His replacement, Petros Christodoulou , said yesterday that a bond sale isn’t currently “on the cards.” Viable Rate The country needs to raise 53 billion euros this year and faces more than 20 billion euros of bond redemptions by the end of May, according to data compiled by Bloomberg. Greece, which has the cash it needs until the middle of March, wants help to borrow at “a viable rate for our economy,” Prime Minister George Papandreou said in a Feb. 21 interview with the British Broadcasting Corp. European finance ministers are scheduled to discuss Greece’s austerity measures at meetings on March 15 and 16. If Greece hasn’t raised money by then, it may be forced to seek financing from the International Monetary Fund, which the EU is seeking to avoid, or get some form of guarantee from its neighbors, Thomson said. Greece is playing “a game of cat and mouse” with the EU, said Thomson. “It’s not necessarily in Greece’s interest to issue a bond this week,” he said. Thomson is also underweight German bonds, meaning he holds less of the securities than in benchmark indexes. The extra yield investors demand to hold 10-year Greek bonds rather than German bunds, Europe’s benchmark government securities, rose 6 basis points to 341 basis points today. Greece would probably need to offer a premium of about 350 basis points on a new 10-year issue with EU backing, or more than 400 basis points without a guarantee, Thomson said. A basis point is 0.01 percentage point. To contact the reporters on this story: John Glover in London at johnglover@bloomberg.net ; Matthew Brown in London at mbrown42@bloomberg.net
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