Greece regained some market confidence on Monday as a hefty premium on the first Greek bond issue of the year led to strong demand, providing relief from a deep economic crisis that has battered its markets for weeks.

Demand for the bond reached more than three times the initial offered size, a welcome boost since the worst Greek economic crisis in decades led to questions about its ability to raise financing and dented the euro.

"There is absolutely no doubt, this new bond is tremendously cheap, and I suspect it is generating selling activity as people scrabble to get involved," said Peter Chatwell, an interest rate strategist at Calyon in London.

Chatwell said that if Greece is able to issue more of the bond than initially expected "it will take a lot of funding pressure off the Greek government".

The new Socialist government, which inherited a massive budget deficit of 12.7 percent of gross domestic product in 2009, is rushing to cut spending to repair public finances — austerity which analysts fear could ignite popular opposition.

In a first test of Prime Minister George Papandreou's mettle to face social opposition, hundreds of farmers protested in Athens on Monday after blocking roads and border crossings to fellow EU member Bulgaria in the past nine days.

The farmers want higher prices and subsidies for their produce.

"They are drinking our blood, farmers fight back!" the farmers chanted as they marched in central Athens.

Greece's problems have added uncertainty for the euro currency in recent weeks as it has turned the spotlight on the fiscal challenges of other weak euro members such as Portugal, Spain and Ireland.

Portugal's Socialist government was due to release its 2010 budget proposal on Tuesday, which has been delayed due to elections, and markets are paying close attention to it for signs of efforts to reduce the budget deficit.

The European Commission denied on Monday a story in German magazine Der Spiegel which said a report by the EU executive voiced concern that some countries' rising budget deficits could undermine the bloc's monetary union.

"The article seems to be quite sensationalist and does not reflect the Commission's analysis of the situation," EU Commission spokeswoman Amelia Torres said.

Greece's Finance Minister George Papaconstantiou denied any talk of Greece leaving the euro on Monday.

"Speculation of exit from the currency union are flights of fancy," Papaconstantinou was quoted on Monday as telling German paper Die Welt. "We will conquer budget problems on our own. We have asked no one for financial aid and also expect no help from outside."

Sentiment in Greek markets was buoyed after demand for its bond reached 16 billion euros ($22.62 billion), above the initial offered issue size of up to five billion euros.

"The book is at 16 billion euros, pricing will tighten," a banker said.

Bank sources said the price of the bond was likely to rise on the strong demand, from the initial 375-basis-point level over mid-swaps that was indicated.

"The book should close early, I don't think they will issue more than 7.0 billion euros as Greece is paying up for the funds. I think the market's read will be positive, without this meaning our problems are over," said Millennium Bank-Greece treasurer Panagiotis Dimitropoulos.

"A successful takedown of this deal is in our view pivotal for a change in the current bearish momentum in Greek spreads," said Wilson Chin, a bond analyst at ING in Amsterdam.

Greece has a financing requirement of about 53 billion euros this year.

The euro gained after news that demand for Greece's bond was strong. The euro rose 0.4 percent to the day's high of $1.4191 after news of the strong demand for the Greek bond.

Greek bank stocks, having faced heavy selling in recent weeks, rose 2.4 percent. The European Commission on Monday said it had approved a Greek support package to credit institutions until June 30.

The premium demanded by investors, or spread, to hold Greek 10-year bonds over German Bunds, fell below 300 basis points, down from around 310 basis points late on Friday.

The yield on Greek 5-year paper was at 5.93 percent on Monday, versus 2.32 percent on equivalent duration bunds. 

On Friday, Greece mandated Morgan Stanley, Goldman Sachs, Deutsche Bank, Credit Suisse, National Bank of Greece and EFG Eurobank for the bond, due Aug. 20, 2015.