Greece on Monday sold 5 billion euros ($6.7 billion) of 7-year bonds with a looming Easter holiday and a subdued European market dampening demand in the first test of investor appetite since last week's EU-backed debt support deal.

Order levels on the new bond stood at around 7 billion euros compared to more than 16 billion euros in interest shown for a benchmark 10-year paper whose success in early March had eased some of the nerves over Greece's financing.

About 175 institutions bid, sources at the lead managers said, compared to 400 investors for the previous 5 billion euro, 10-year issue.

It is Easter week in Greece and Europe and this explains why demand may seem a bit softer, said a source at one of the five banks leading the issue.

Analysts also said demand for euro-denominated debt had been muted in recent days and that 7-year bonds tended to be less popular than more typical 10- and 20-year issues.

I think taking into account that we're in the Easter lull, last week's auctions were quite poor, and the tenor was rather unconventional, the Greek deal actually did quite well, said Peter Chatwell, bond analyst at Credit Agricole CIB.

But the Greek stock market gave up early gains and closed down 0.5 percent as traders pointed to the bond sale.

The market turned negative as there are concerns over the low participation in the order books for the bond, said Beta Securities chief trader Takis Zamanis.

The bond priced at mid-swaps plus 310 basis points, making interest more than twice what Germany would pay and still at levels officials have said are unsustainable for state finances in the long run.

The premium investors demand to hold Greek government bonds rather than German benchmark Bunds rose back to levels seen ahead of Thursday's deal under which the EU and International Monetary Fund would bail out Greece as a last resort.

I think it's a big mistake to believe that a few days after the decisions ... spreads would collapse, Finance Minister George Papaconstantinou told national television. We know that spreads will gradually fall and will drop further when Greece turns the corner in April and May.


Greece, rated A2 by Moody's and BBB+ by Fitch and Standard & Poor's, has about 23 billion euros' worth of bonds -- equivalent to almost 10 percent of its gross domestic product -- maturing between now and the end of May.

Some obligations could be met from cash reserves of 7 billion euros, the country's debt agency has said, leaving it at least 16 billion euros to raise in the coming weeks during a debt crisis that has shaken global markets.

So far this year Greece has raised about 23 billion euros out of a 53.2 billion euro projected need for 2010.

Chris Pryce, senior analyst for Greece at credit agency Fitch Ratings, told Reuters on Monday he remained concerned about the readiness of Greece's European partners to help.

The EU has to be clearer about the circumstances in which it would lend to Greece, Pryce said in an interview. At the moment the worry is they wouldn't do anything until the last minute and that could conceivably be too late.

Confidence in Greece as a borrower has been badly shaken by a 300 billion euro ($403 billion) debt pile that exceeds the country's 240 billion euro economic output and by revelations that the extent of its budget problems had not been reported.

We are pleased to have had a successful 5 billion euro transaction in a maturity that is not plain vanilla, Greece's debt agency chief Petros Christodoulou told Reuters.

Reflecting continued uncertainty over Greece's finances and increased debt supply, the 10-year Greek/German yield spread widened to 322 basis points on Monday.

The cost of protecting Greek government debt against default also rose, with five-year credit default swaps hitting 303.5 basis points from 295.3 at the New York close on Friday.

Alpha Bank, Emporiki Bank, ING, Bank of America Merrill Lynch and Societe Generale were lead managers for Greece's third syndicated issue so far this year.

(Additional reporting by Angeliki Koutantou and Renee Maltezou in Athens and Kirsten Donovan and Jane Merriman in London; Writing by Paul Hoskins; Editing by Ron Askew and James Dalgleish)