LISBON: Portugal's borrowing costs fell sharply in a bond auction on Wednesday where the country sold all 1.25 billion euros ($1.36 billion) total of five- and 10-year bonds on offer.
After a sharp rise in secondary market bond yields in late 2016 and early 2017, Portugal has this month emerged as one of the best performing euro zone bond markets, helped by its improving economy and shrinking budget deficit.
State debt agency IGCP sold 618 million euros worth of bonds maturing in October 2022 and 632 million of debt expiring in April 2027.
The allotment yield on the shorter bond fell to 1.828 percent from 2.174 percent in the previous auction of the same maturity last month. The longer-dated bond yielded 3.386 percent, down from 3.95 percent on the closest comparable issue, which was nine-year maturity auctioned in March.
"It was a good auction, Portugal issued at below the average cost of debt. This means paying less in the long term, which is good for the economy and for investor confidence," said Filipe Silva, debt manager at Banco Carregosa in Porto.
Demand in the auction outstripped the amount placed by 2.03 times on the shorter bond and 1.92 times on the longer bond.
In the secondary market, Portugal's benchmark 10-year bond yield slipped to 3.41 percent after the auction from 3.43 percent earlier.
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