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Portugal raises 1.5 bn euros at lower rates

Published on 01/02/2012

Bailed-out Portugal managed to raise 1.5 billion euros ($2.0 billion) at much lower rates Tuesday, despite recent increased funding pressures on the markets, the national debt agency said.

The agency said it sold 750 million euros in 3-month bills at 4.068 percent, down from the 4.346 percent paid at a January 18 sale, with another 750 million euros in 6-month bills going at 4.463 percent, down from 4.740 percent.

Bids fell, however, with offers for the 3-month bills 2.8 times the amount on offer and 2.6 times on the six-month bills, down from 4.1 times and 3.0 times on January 18, it said.

The sale, which aimed to raise 1.25-1.50 billion euros, comes as yields — the rate of return earned by the holder — on its longer-term government debt have soared.

Lisbon got 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 has grown that Portugal may need more help, driving its borrowing costs sharply higher.

In midday trade, the yield on the benchmark 10-year government bond was 14.878 percent, down sharply from Tuesday’s close at 15.669 percent but still way above sustainable levels of 6.0-7.0 percent for long-term funds.

The state debt agency puts the country’s borrowing needs this year at 17.4 billion euros and plans to raise 5.25-6.50 billions in the first quarter of the year.