MADRID — Portugal easily sold a new batch of short-term debt Wednesday, lifting some of the gloom after a recent surge in its borrowing costs amid concerns that the country will have to follow Greece in seeking a new bailout.
Portugal auctioned €1.5 billion, or $2 billion, in three- and six-month Treasury bills — the full amount that it had targeted. The auction was more than twice oversubscribed and the yields were down from the latest such sale on Jan. 18, when Portugal sold €2.5 billion of Treasury bills.
The new three-month bills had an average yield of 4.07 percent, down from 4.35 percent last month. The six-month bills went at 4.46 percent, down from 4.74 percent.
The successful debt sale came amid a broader rebound on European bond markets. In Spain, the yield on 10-year government bonds fell to its lowest level since November 2010, down about 10 basis points to 4.8 percent on the secondary market.
Italy’s dropped even more but remains at a painfully high 5.7 percent — more than three times what Germany has to pay for its 10-year bonds.
Portugal, which received a €78 billion, or $102.5 billion, bailout last May from the European Union and International Monetary Fund, continues to struggle.
Portuguese five-year credit default swaps recently set record highs, indicating that investors saw a 70 percent chance that the country would still default.
The yield on its 10-year government bonds was down almost a full a percentage point, to 14.28, after spiking on Monday above 17 percent — its highest level since the launch of the euro.
Much of the concern centers on whether ongoing talks between Greece and its bondholders — whatever their outcome — will provide a blueprint for Portugal to renegotiate its own bailout terms rather fulfill the conditions agreed last May with international creditors.
“As of today, Portugal’s efforts have not succeeded in anchoring markets expectations,” in terms of convincing investors that Lisbon could stick to the bailout terms, said Francesco Franco, assistant professor at the Nova School of Business and Economics in Lisbon.
Instead, he said “the Greek deal, if successful, is seen as an alternative template.”
Portugal and Greece are the only euro zone economies to have their debt rated as junk by all three major rating agencies, after Standard & Poor’s last month followed Fitch Ratings and Moody’s Investors Service in downgrading Portugal.
However, the center-right government of Prime Minister Pedro Passos Coelho has insisted in recent days that it would not require further bailout money.
Instead, Mr Passos Coelho has said that Lisbon’s request was for more time, and that Portugal would comply with the terms of the existing bailout “whatever the cost.”
In the short term, that cost is helping to plunge Portugal into one of the deepest recessions in the Western world, with the economy expected to contract 3 percent in 2012, rather than the 2 percent that was foreseen last June, when Mr Passos Coelho was elected.
Still, because of its bailout agreement, Portugal has no need to return to the long-term debt market for further financing until next year.
nytimes.com
Portugal auctioned €1.5 billion, or $2 billion, in three- and six-month Treasury bills — the full amount that it had targeted. The auction was more than twice oversubscribed and the yields were down from the latest such sale on Jan. 18, when Portugal sold €2.5 billion of Treasury bills.
The new three-month bills had an average yield of 4.07 percent, down from 4.35 percent last month. The six-month bills went at 4.46 percent, down from 4.74 percent.
The successful debt sale came amid a broader rebound on European bond markets. In Spain, the yield on 10-year government bonds fell to its lowest level since November 2010, down about 10 basis points to 4.8 percent on the secondary market.
Italy’s dropped even more but remains at a painfully high 5.7 percent — more than three times what Germany has to pay for its 10-year bonds.
Portugal, which received a €78 billion, or $102.5 billion, bailout last May from the European Union and International Monetary Fund, continues to struggle.
Portuguese five-year credit default swaps recently set record highs, indicating that investors saw a 70 percent chance that the country would still default.
The yield on its 10-year government bonds was down almost a full a percentage point, to 14.28, after spiking on Monday above 17 percent — its highest level since the launch of the euro.
Much of the concern centers on whether ongoing talks between Greece and its bondholders — whatever their outcome — will provide a blueprint for Portugal to renegotiate its own bailout terms rather fulfill the conditions agreed last May with international creditors.
“As of today, Portugal’s efforts have not succeeded in anchoring markets expectations,” in terms of convincing investors that Lisbon could stick to the bailout terms, said Francesco Franco, assistant professor at the Nova School of Business and Economics in Lisbon.
Instead, he said “the Greek deal, if successful, is seen as an alternative template.”
Portugal and Greece are the only euro zone economies to have their debt rated as junk by all three major rating agencies, after Standard & Poor’s last month followed Fitch Ratings and Moody’s Investors Service in downgrading Portugal.
However, the center-right government of Prime Minister Pedro Passos Coelho has insisted in recent days that it would not require further bailout money.
Instead, Mr Passos Coelho has said that Lisbon’s request was for more time, and that Portugal would comply with the terms of the existing bailout “whatever the cost.”
In the short term, that cost is helping to plunge Portugal into one of the deepest recessions in the Western world, with the economy expected to contract 3 percent in 2012, rather than the 2 percent that was foreseen last June, when Mr Passos Coelho was elected.
Still, because of its bailout agreement, Portugal has no need to return to the long-term debt market for further financing until next year.
nytimes.com
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