Portugal borrows 1.5 bn euros at increased rates

Portugal borrowed 1.5 billion euros ($1.98 billion) in short-term debt, the maximum target, but had to offer slightly increased interest rates on Wednesday, market data showed.

Portugal raised 500 million euros in six-month debt at 2.935 percent from 2.9 percent on April 4.

It also borrowed 1.0 billion euros for 12 months at 3.908 percent from 3.652 percent under a comparable issue on March 21.

Demand was firm, particularly for the six-month debt.

The Portuguese debt agency had aimed to raise 1.25-2.5 billion euros.

Demand exceeded supply, amounting to 4.1 times the offer of six-month debt and 2.7 times the 12-month debt.

Portugal is struggling to overcome a budget deficit and debt crisis, after being rescued by the European Union and International Monetary Fund in May 2011 with a loan of 78 billion euros to cover its financing needs up to September 2013.

The rescue was conditional on enactment of draconian budget reforms which have plunged Portugal into recession, and some analysts hold that a second rescue may be needed.

But the government has ruled this out, noting that its borrowing rates have generally fallen in recent weeks.

Finance Minister Vitor Gaspar has said that foreign investors are showing interest in Portuguese debt and that the outlook for Portugal to return fully to debt markets within the deadline has never been so good.