LISBON: Portugal on Wednesday swapped almost 1.75 billion euros in bonds expiring next year and in 2016 for longer maturities, postponing its medium-term debt repayments after completing an EU/IMF bailout earlier this year.
Lisbon is also taking advantage of record low yields for its longer-term debt in the secondary market to effectively reduce its average financing costs, analysts said. Even though some in the market had expected Portugal to shift greater volumes of debt, especially after a much stronger 6.6 billion euro ($8.2 billion) swap in October 2013, analysts were generally upbeat about the results.
"The operation eases the burden, reduces the redemptions over the next two years in reasonably decent volumes," said Orlando Green, debt strategist at Credit Agricole.
"It is a small operation in the context of debt sustainability, but it gives investors a bit of confidence that Portugal is now in much better condition in terms of its debt." Filipe Silva, debt manager at Banco Carregosa, said the volume was limited by some players' relatively rigid portfolio investment rules, and the fact that investors willing to exchange their debt for longer issues was positive.
"This swap is good for Portugal, the yields are now lower than a year ago and our average debt cost has just come down."
Portugal now has around 15 billion euros in medium- and long-term debt expiring in 2015 and 2016, plus 8 billion euros in repayments to make to its EU and IMF creditors.
It has already prefinanced some of its 2015 needs.
The benchmark 10-year bond yield hit a record low of 2.923 percent just before the results came out, then edged up to 2.928 percent. Yields have been falling on expectations of radical European Central Bank policy measures next year.
The IGCP debt agency bought back 240 million euros of October 2015, 3.35 percent coupon bonds; 553 million euros in 6.4 percent February 2016 bonds; and 955 million in 4.2 percent October 2016 bonds.
Those were replaced with 943 million euros in 3.85 percent April 2021 bonds and 805 million euros in 4.95 percent October 2023 bonds.
Portugal has gradually returned to normal market financing this year after resorting to a 78 billion euro EU/IMF bailout in 2011.
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