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EFSF Sells $2.6 Billion of 3-Month Bills to Add Flexibility

The European Financial Stability Facility sold the maximum amount of bills at its first auction of short-dated securities as the bailout fund seeks to enhance its ability to respond to Europe’s debt crisis.

The EFSF issued 1.97 billion euros ($2.6 billion) of 91-day bills at an average yield of 0.2222 percent, the Bundesbank said today in a statement. Investors bid for 3.2 times the amount sold, according to data from the German central bank. The euro and Italian government notes rose immediately after the sale.

“This programme will not only extend our range of issues to the short-term, but it will increase the flexibility of the whole funding strategy,” Christophe Frankel, deputy chief executive officer of the EFSF, said in an e-mailed statement. The Luxembourg-based fund “aims to hold regular bill auctions and the calendar for 2012 is expected to be released early next year,” the EFSF said.

The EFSF sells debt to finance rescue loans extended to Europe’s high debt and deficit nations.

The yield on its bills compared with a rate of minus 0.08 percent on similar-maturity German securities and zero on Dutch debt.

“With three-month EFSF bills yielding a decent amount above where Dutch bills trade, it was no surprise that some excess cash found its way there,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London.

Euro-area leaders agreed last week on a blueprint for a closer fiscal union, seeking to prevent Spain and Italy from being engulfed by troubles that forced Greece to seek an initial rescue in April 2010, pushed Ireland and Portugal into aid programs over the ensuing year and led to a second Greek bailout in late October.

Italian two-year note yields were 22 basis points lower at 5.63 percent at 1:35 p.m. London time. The euro rose as much as 0.4 percent to $1.3237 before trading little changed at $1.3183.

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