LISBON: Portugal swapped around 1 billion euros in bonds expiring between 2017 and 2019 for much longer maturities on Friday to alleviate its medium-term bond redemptions in the first bond operation since Britain's vote to leave the European Union.
The fallout from Britain's departure, known as Brexit, could hit the euro zone's faltering economic growth and increase pressure on peripheral members such as Portugal, which only emerged from a bailout in 2014.
The IGCP debt agency bought back nearly 547.3 million euros of October 2017, 4.35 percent coupon bonds, 314.5 million euros in 4.45 percent June 2018 bonds, and 150 million euros of June 4.75 percent June 2019 paper.
Those were replaced with nearly 733 million euros in 2.857 percent October 2025 bonds and 279 million euros in 4.1 percent April 2037 bonds.
"For Portugal (the swap) is certainly a good step, and a very good omen for one or two bond sales in July," Commerzbank's interest rate strategist David Schnautz said.
"It was a good idea to show up with a primary event like that after the Brexit vote and all the market volatility. It reinforces the idea that after Brexit investors are not fleeing Portugal, even after some noise over fundamental concerns about the country," he said.
Schnautz said the operation was similar in size to Portugal's previous bond buyback in February. Although it would have been preferable to have a stronger placement of the longest-dated issue, he added, the final result was solid and showed the IGCP's flexibility.
In a previous bond exchange in April last year, Lisbon swapped over 4 billion euros total in debt.
The IMF on Thursday lowered its growth forecast for Portugal and said the slowdown would probably require additional spending control measures. On Wednesday German Finance Minister Wolfgang Schaeuble pressed Portugal to stick to its European fiscal goals, warning that it otherwise risked a new bailout.
Portugal's left-leaning government, which has been reversing the austerity policies of the previous administration, insists it will reduce the deficit below the European threshold of 3 percent this year without additional measures.
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