Portugal's T-bill yields fall to 4-year lows at auction

LISBON: Portugal's short-term borrowing costs fell to their lowest levels at auction for more than four years on Wednesday, underpinning the country's efforts to make a trouble-free exit from its international bailout this year.

The IGCP debt agency said it sold all 1.25 billion euros ($1.71 billion) of Treasury bills on offer, comprising 1 billion euros of 12-month and 250 million of 3-month paper, amid healthy demand. "Today's T-bill auctions further illustrate that Portugal continues to make good progress in heading for an exit from its bailout programme," said Jan Von Gerich, chief strategist for developed markets at Nordea in Helsinki.

"Market confidence towards the country has certainly returned to a large extent." The average yield on 12-month bills fell to 0.750 percent from 0.869 percent at a previous auction in January.

The yield on 3-month bills fell to 0.462 percent from 0.495 percent in January.

Both were at their lowest levels since late 2009.

Portugal's benchmark bond yields have fallen this year, boosted by growing optimism that the euro zone crisis is abating and that Lisbon will be able to move on as planned in mid-2014 from the bailout programme it took in mid-2011.

"The decline in yields (at the auction) is important as it reflects a situation that has been here since the end of last year and that has helped issues by governments and by companies," said Ricardo Marques, debt analyst at Informacao de Mercados Financeiros consultants.

As economic growth returns and the country returns to issuing bonds, Portugal is increasingly seen as being able to make a smooth exit from the bailout in May - though it is unclear if it will be able to do so without the support of a precautionary financing deal.

It sold 10-year bonds last week and made a five-year issue in January and has now already met its 2014 financing needs.

Demand at Wednesday's auction outstripped the amount placed by 6.25 times on 3-month bills and 2.12 times on the longer maturity, the IGCP said.