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Portugal plans return to medium-term bond market

Published on 22/01/2013

Portugal has ordered preparations for a five-year bond issue, its first return to the medium-term debt market since being bailed out in 2011, which could come as soon as Wednesday, media reports said.

The country’s debt management agency IGCP said it had “mandated Barclays, Banco Espirito Santo, Deutsche Bank and Morgan Stanley to lead manage a syndicated tap of its 4.35-percent due October 2017 bonds.”

The IGCP said in a statement that “the transaction will be launched and priced in the near future, subject to market conditions.”

The online edition of Portuguese business daily Diario Economico said the issue of five-year bonds “should be concluded in the next 24 hours” and aimed to raise up to 2 billion euros ($2.7 billion).

Such an operation, which consists of borrowing from a group of banks selected in advance that then try to sell the debt on to other investors, would be an important gauge of market interest and confidence in Portugal’s debt.

Finance Minister Vitor Gaspar told AFP on Monday in Brussels that Portugal could make its return to the medium-term markets very soon.

Portugal has been shut out of medium- and long-term debt markets since it received a 78-billion-euro bailout in May 2011 from the European Union and International Monetary Fund, but is supposed to start financing itself on markets again this year.

The country received the support Monday of eurozone finance ministers to have the repayment period of its bailout loans extended in order to improve its finances and ease its return to debt markets.

A final decision may not come for a couple of months.

In a sign of growing investor confidence, the rate of return to investors on Portugal’s 10-year bonds fell on Tuesday under 6.0 percent on the secondary market for the first time since December 2010.

Investors could also take reassurance Tuesday from news that Portugal had met its 2012 public deficit target of 5.0 percent of gross domestic product.

A return to the medium- and long-term debt markets would also open up the possibility for Portugal to ask the European Central Bank to buy its bonds under its as-yet untested OMT programme.

The ECB unveiled last year the OMT programme, which is for eurozone countries implementing a bailout or precautionary programme and borrowing on long-term debt markets.