LISBON: Portugal sold 1.5 billion euros in 10-year bonds on Wednesday, above the indicated offer amount, at a record low yield for a debt auction as the country reaps the benefits of planned quantitative easing by the European Central Bank.
The October 2025 bond was issued at a yield of 2.0411 percent, falling sharply from 2.5062 percent in the previous auction on Feb. 11, the state debt agency IGCP said. That yield was below the secondary market level of 2.08 percent.
This month was the first since Portugal's exit from its international bailout programme last May that the IGCP has held two monthly auctions.
"One more success, one more historic minimum yield at a bond auction with an amount above the offer amount," Filipe Silva, debt manager at Banco Carregosa, said.
"Portugal is managing to issue long-term debt at a rate which makes it well worthwhile to pay back the IMF loan."
Since exiting the bailout, Portugal has resumed normal financing in the debt market, with its bond yields falling sharply from the highs of nearly 18 percent in 2012.
The country said this month it planned to pay back the IMF 14 billion euros early for its part of the bailout. At the yields the country can now get by issuing new debt, it is worth paying off the IMF debt which has a rate of around 3.5 percent.
"Portugal is managing to issue long-term debt at a rate which makes it well worthwhile to pay back the IMF loan," said Silva.
"If this decline in rates continues, Portugal can issue everything it wants to pay the IMF and make the repayment earlier than planned."
Portugal's 10-year yields dropped below US treasuries of the same maturity this week, showing the country has all but shrugged off the uncertainty created by the extension of Greece's bailout.
More recently, yields were helped lower by the announcement of a sovereign bond-buying programme in the euro area by the European Central Bank.
The bid-to-cover ratio was 1.82 in the auction.
Comments
Comments are closed for this article.