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Investors welcome Portugal’s return to bond market

Published on 07/05/2013

Portugal got a boost from investors on Tuesday when it returned to the long-term debt market for the first time since obtaining bailout funding two years ago, with the finance minister saying that demand for bonds totalled three time the amount on offer.

Portugal is working on yet new measures to crack down on public spending and pursue deep structural reforms of the economy.

The latest issue of bonds to fund debt was seen as a vital test of market judgement of these efforts to win back the confidence of investors and savers.

“It’s been a great success,” Finance Minister Vitor Gaspar told Portuguese media while visiting Brussels. “Demand has been three times greater than the offer, this means that it will reach nine billion euros ($11.8 billion).”

Dow Jones Newswires reported that the issue, totalling three billion euros with a 10-year maturity, had been placed at an interest rate of about 5.6 percent.

Portugal’s debt office is expected to announce the final results on Tuesday afternoon.

Portugal was shut out of medium- and long-term debt markets at the time it was forced to negotiate the 78-billion bailout loan in May 2011.

The issue comes just as the “troika” of international lenders — the European Central Bank, the European Union, and the International Monetary Fund — arrive to analyse the Portugal’s latest programme of measures to meet the conditions of the funding.

The sweeping package, announced by the centre-right government last week, involves the slashing of 30,000 public sector jobs and the full retirement age for public servants having been pushed back to 66 years instead of the previous 65.

Local media said six banks, CaixaBI, Citigroup, Credit Agricole, Goldman Sachs, HSBC and Societe Generale, were appointed to manage the bond issue which matures on February 15 in 2024.

The sale will allow Portugal to test market confidence without running too great of a risk.

If it is successful in the sale, it would represent an important step for the country’s return to the financial markets and could help prevent it from having to seek a second bailout loan once the current one has expired.

Portugal made an early return to the medium-term debt market in January, with a successful five-year bond issue in which it raised 2.5 billion euros. It last issued 10-year bonds in April in 2011.