Greek yields rise on report ECB wary of raising T-bill sales

Greek yields rose on Wednesday as a media report that the ECB was unwilling to approve Athens' proposal to raise the ceiling for its treasury bill issuance cooled optimism that a compromise debt deal may be reached.

Citing people familiar with the matter, the Financial Times quoted one eurozone official as saying the European Central Bank "will play hardball" on Greece's plans to sell short-term Treasury bills worth 10 billions euros to tide over the debt-ridden country for the next three months.

Without the financing, Greece will exit its international bailout program, which has been in effect since May 2010, and might run out of cash within weeks, the newspaper reported on its website late on Tuesday.

This put a brake on Tuesday's sharp rally in Greek bonds triggered by an apparent softening in demands of a debt write-down by the anti-austerity SYRIZA government.

Greek three- and five-year yields were up 30-50 basis points at 17.2 percent and 13.5 percent respectively while 10-year yields were 40 bps higher at 10.24 percent. These were still modest moves after Tuesday's 140-300 bps points fall in the yields and many analysts expect trade to remain volatile ahead of a meeting between Finance Minister Yanis Varoufakis and ECB officials later in the day.

"We've stepped back from the abyss but there are still tough negotiations to get through between the new government and the EU," said Nick Stamenkovic, a strategist at RIA Capital Markets.

"The proposals from the finance minister seem to fall on deaf ears at the ECB ... An early agreement seems unlikely and Greek yields will continue to trade in volatile fashion until we get clarity."

Prime Minister Tsipras and Varoufakis have been visiting European capitals this week...