UPDATE 1-Portugal says will only return to regular bond issuance if market conditions right

Fri Jul 12, 2013 8:42am EDT

LISBON, July 12 (Reuters) - Portugal's debt agency said on Friday it would only return to regular bond issuance in the second half of 2013 "if market conditions are conducive."

It added, however, that it intends to hold regular treasury bill auctions every month through year-end.

Portuguese bonds have sold off sharply in the past two weeks as a political crisis erupted within the ruling coalition.

The crisis reignited this week after the president failed to endorse a government reshuffle aimed at ending the rift. Instead the president called on a cross-party commitment to exit the country's bailout as planned in June 2014, followed by elections.

Portuguese 10-year bond yields surged 53 basis points to 7.50 percent on Friday on the political concerns.

Despite the crisis, which has prompted concerns Portugal may need a new bailout, the debt agency said the country's finances were on a stable footing with all 2013 financing needs already covered. It has begun to pre-finance 2014 financing needs in the second quarter.

IGCP said it would issue a total of up to 8 billion euros of treasury bills in the second half, with the first auction to be held on July 17 of five- and 12-month series.

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