LISBON: Portugal sold all Treasury bills on offer at an auction on Wednesday, with yields on the longer 18-month maturity falling as investors brushed off concerns of possible contagion from the financial crisis raging in Cyprus.
Portuguese debt yields have dropped since the start of the year, helped by a five-year debt issue in January that marked Lisbon's return to the bond market after its mid-2011 bailout.
"The most important message from this auction is that there was no contamination from the Cyprus issue," said Filipe Garcia, head of Informacao de Mercados Financeiros consultants in Porto.
Cyprus is at risk of financial meltdown after the island's parliament rejected the terms of a European bailout, raising the spectre of a looming default and bank crash.
Portugal's debt agency said the average yield on 18-month bills, of which it sold 1.2 billion euros, fell to 1.506 percent from 1.963 percent at the last auction of the same maturity in January.
The yield on 3-month bills edged up to 0.757 percent from 0.737 percent in February.
Analysts said the drop in the premium was helped by last week's easing of Portugal's bailout targets by its EU and IMF lenders, as well as Europe's intentions to lengthen debt repayment maturities for Portugal and Ireland.
The agency sold 300 million euros of 3-month bills at the auction. Demand outstripped the amount placed by 3.9 times on 3-month bills and 2.1 times on 18-month bills, the IGCP said.
Portuguese officials have said a 10-year bond issue was likely to come next and embarked on a European roadshow for potential investors, but analysts say the unease over Cyprus in the markets meant that was now unlikely to happen soon.
"Unless the Cypriot case totally blows up, Portugal should find good demand for a new bond issue as well, though the uncertainty created by Cyprus most likely means Portugal will not be entering the market in the very near future," said Jan von Gerich, chief strategist for developed markets at Nordea Bank in Helsinki.
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