How Portugal raises €3bn bond issue ..?

PARIS: Portugal raised ¤3bn yesterday amid strong demand for an issue of 10-year bonds in a key test of whether the eurozone country can exit cleanly its EU-IMF bailout in May, a banking source said.

The country raised ¤3bn ($4.1bn) with demand reaching ¤9.5bn, with just the interest rates left to be calculated, the source said.

“It is a very beautiful order book,” said the source.

“Portugal is in the process of showing that it can refinance itself on the markets without any difficulty,” added the source.

A successful placement of 10-year bonds at affordable rates would demonstrate that Portugal can finance itself on the markets before it exits its three-year ¤78bn bailout from the EU and IMF ends in May.

Last month Portugal enjoyed strong demand for an issue of 5-year bonds, raising ¤3.25bn at a lower rate of 4.657 percent.

The country aimed to seize on improving market sentiment which has seen the rate of return on its 10-year bonds fall below five percent on the secondary market, from above six percent at the beginning of the year.

During its last auction of 10-year bonds in May 2013, Portugal raised ¤3bn at 5.669 percent with demand at over 10bn.

The two bond issues, plus a bond swap carried out in December, means that Portugal has nearly completed the amount of borrowing it needs for this year.

Portugal has not made a final decision as to whether or not it will seek a precautionary arrangement from the EU’s ESM bailout fund.

Such a precautionary arrangement would allow the European Central Bank to step in and buy Portugese bonds in case of a deterioration on the debt market. AFP

Leave a Reply