Portugal raises 2.0 bln euros at sharply lower rates

Portugal raised 2.0 billion euros ($2.6 billion) at sharply reduced interest rates in a short-term bond auction on Wednesday, as the eurozone financial markets eased after the ECB’s bond buying programme announcement.

Portugal, under an EU-IMF bailout, raised 1.291 billion euros for 18 months at 2.967 percent compared with 4.537 percent at the last such issue on April 4. It raised 709 million euros for six months at 1.7 percent, from 2.292 percent on July 18.

The country managed to raise a sum that was above its target of 1.75 billion euros, with demand 2.4 times over the 18-month bond offer and 3.1 times for the 6-month offer.

The bond issue came after Portugal obtained a grace period of one year from its international lenders, the European Union and International Monetary Fund, to reduce its public deficits.

Another factor which has brought down borrowing rates for eurozone countries in trouble is a recent decision by the European Central Bank to buy their bonds on the secondary market, subject to tough conditions.

“This issue was a success and shows that investors have not been affected by the political situation in Portugal,” said Filipe Silva, an analyst at Carregosa bank.

The centre-right government’s move to toughen austerity measures has been sharply criticised by the opposition.

The spending cuts and economic reforms required as part of the bailout have caused the economy to contract and amplified the social discontent marked Saturday by massive demonstrations across the country.