Portugal pays lower rates in short-term debt sale

Portugal managed to raise 3.0 billion euros ($4 billion) at lower rates in a bond sale Wednesday, the national debt agency said, despite a recent downgrade by Moody’s ratings agency.

The debt agency said it sold 1.5 billion euros in 12-month bills at 4.943 percent, down from 4.986 percent for 11-month bonds on January 18.

The agency also raised 300 million euros in 3-month bills at 3.845 percent, down from 4.068 percent earlier this month, and 1.2 billion euros in 6-month bills at 4.332 percent, down from 4.463 percent.

“Rates fell across all maturities,” said Filipe Silva from Banco Carregosa, adding that the trend showed perception of Portugal as a risk was diminishing.

Portugal had initially set a target of between 1.5 and 2.0 billion euros for the sale but raised it due to investor interest, the debt agency said.

With the operation, Portugal exceeded its refinancing target of between 5.25 billion and 6.5 billion euros for the first quarter of 2012.

The debt agency puts the country’s borrowing needs this year at 17.4 billion euros.

Moody’s on Monday cut its rating on six European nations including Portugal due to the eurozone debt crisis.

The ratings agency said that Europe’s weakening economic prospects “threaten the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness.”

Lisbon received an EU and International Monetary Fund bailout worth 78 billion euros in May 2011 in return for a series of tough austerity measures to slash public spending and increase revenues.

The austerity programmes have however slowed the economy further and in recent weeks speculation had grown that Portugal may need more help, driving up its borrowing rates.

— Dow Jones Newswires contributed to this report —