LISBON: Portugal's sale this week of bonds including a 30-year maturity confirms market confidence in the country that should lead to improvements in its credit ratings, Prime Minister Pedro Passos Coelho said on Friday.
He told parliament there was a lag between investors' more positive perception of the country's ability to reduce its budget deficit and the stance of credit rating agencies. All three big rating firms rank Portugal slightly below investment grade following its debt crisis and 2011 bailout.
"There is this lag, and it will be corrected by ratings agencies, a day sooner or a day later," Passos Coelho said.
Portugal sold 5.5 billion euros ($6.38 billion) of bonds on Tuesday, including 2 billion euros of 30-year debt, its first sale of such a long maturity since 2006. Foreign investors snapped up more than 90 percent of the paper.
"The way in which this placement worked out, with diversified foreign demand, is the most important gauge of confidence," the prime minister said. The 30-year sale was particularly important, he added, because it matures after Portugal is scheduled to have repaid all 78 billion euros of its bailout loans.
Lisbon exited the EU/IMF-led rescue programme last May.
Rating agencies Moody's and Fitch peg Portugal one notch below investment grade after raising its ratings last year, while Standard & Poor's rates it another notch lower.
Fitch warned on Thursday, however, that euro zone countries like Portugal could be downgraded if the region suffers prolonged deflation that could worsen their already heavy debts.
But Passos Coelho said he had "absolute confidence" the country will push forward with budget deficit cuts to help reduce its debt as the economy recovers from its worst recession since the 1970s.
"It is essential for investors and ratings agencies to see that this trajectory is maintained," he said, citing the example of Greece, where the prospect austerity policies will be dropped has pushed benchmark 10-year bond yields above 10 percent.
Portugal's benchmark 10-year bond yield fell to 2.57 percent on Friday -- near all-time lows -- from Thursday's 2.63 percent.
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