Portugal will offer up to €750 million in 10-year bonds next Wednesday in its first bond auction since April 2011, pursuing a full return to market financing as the end of its EU-IMF bailout approaches.
Portugal has already successfully sold various bonds via syndication since early 2013 and analysts see the resumption of regular auctions as the final move towards establishing normal market access.
It should benefit from lower borrowing costs after its benchmark 10-year bond yields slid to their lowest levels in eight years thanks to improving investor sentiment about the euro zone periphery and expectations that Lisbon will exit its rescue programme smoothly on May 17th.
Portugal’s debt agency IGCP said today it will offer between €500 million and €750 million in 5.65 per cent February 2024 bonds on April 23rd.
The IGCP has said it may hold one or two bond auctions this quarter. “The amount is a bit on the cautious side, but the key thing is that they want to put the icing on the cake, the final little piece in the normalisation of market access,” said David Schnautz, debt strategist at Commerzbank in New York.
“Auctions is what the more mature issuers do.”
Portugal’s 10-year bond yields touched their lowest level since early 2006 below 3.7 per cent earlier today before rising slightly to 3.75 per cent, but still remained below yesterday’s settlement of 3.77 per cent. “Although it’s going to be a slow post-Easter week, we expect the market to be all lined up to make it a successful event... I don’t think there’s going to be much pre-auction cheapening of the bond,” Mr Schnautz added.
Portugal, whose economy last year started to recover from its worst recession since the 1970s, has yet to decide whether to request a precautionary loan after the end of the bailout to support its market financing. Many economists say that, with its economy growing and market access almost back to normal, Lisbon is now likely to follow in Ireland’s footsteps and make a clean exit.
But some recommend caution given Portugal’s still fragile economy. Underlining the revival of confidence in the euro zone’s most vulnerable borrowers, Greece returned to the bond market last week via a its first syndication since 2012.
Reuters
