* Portugal launches 10-year debt sale via syndication
* Sale further step in regaining regular market access
* Bund futures fall before new Fed chair testimony
By Emelia Sithole-Matarise
LONDON, Feb 11 Portuguese bond yields rose on
Tuesday as Lisbon launched a 10-year debt sale in a further step
towards regaining regular market access before its planned exit
from an international bailout later this year.
The sale via a syndicate of banks is expected to raise 2 to
3 billion euros from the re-opening of a 5.65 percent 2024 bond
issued last year.
Portugal aims to quit a 78-billion euro EU/IMF bailout by
mid-year and investor demand at such debt sales, and especially
for longer-dated bonds, will be seen as a measure of Lisbon's
ability to secure funding without an international safety net.
Demand for its bonds so far has benefited from improved
growth expectations and a benign environment in the euro zone
debt market, allowing it to raise 3.25 billion euros at a Jan. 9
sale of five-year bonds, for which demand was 11 billion.
"It's important to see if they are able to easily manage the
re-opening of the bond and show they are able to cover almost
all the maturities on the curve, which will enable them to move
closer to full market access," said ING strategist Alessandro
Portuguese 10-year yields were 1.3 basis
points up at 5.02 percent as traders made room in their books
for the new bonds. Some in the market saw scope for the yields
to fall back in coming weeks to 3-1/2 lows of 4.81 percent hit
in January, especially if the sale beats expectations.
"Sovereigns in the euro area have had a Goldilocks start to
the year. We see tighter spreads as still favourably driven by
improving economic news over the course of 2014. That will be
led by the U.S., while central banks remain accommodative,"
Societe Generale strategist Ciaran O'Hagan said in a note.
The downward trend in Portuguese yields may, however, be
tempered by lingering uncertainty in emerging markets after the
Portugal's "junk" rating excludes it from major European
bond indexes and leaves it with an investor base that includes
investment funds exposed mainly to emerging markets.
At the euro zone's core, German Bund futures shed
11 ticks to 143.54 as investors braced for new U.S. Federal
Reserve head Janet Yellen's first testimony to shed light on the
future pace of reduction in bond-buying stimulus.
Traders said that while Yellen was likely to strike an
upbeat tone on the economy, she would emphasise that interest
rates were set to remain near zero for some time, anchoring
money market rates.