* Lisbon aims to raise 3 bln euros from sale-IFR
* Sale further step in regaining regular market access
* Bund futures steady before new Fed chair testimony
By Emelia Sithole-Matarise and Joshua Franklin
LONDON, Feb 11 Portuguese debt yields edged up
on Tuesday as Lisbon sold a 10-year bond in a further step
towards regaining regular market access before its planned exit
from an international bailout later this year.
Lisbon aims to raise 3 billion euros from the syndicated
offer of a 5.65 percent 2024 bond first issued last year, a
source close to the deal told IFR, a Thomson Reuters service.
The deal will be priced later in the day.
Portugal plans to quit a 78-billion euro EU/IMF bailout by
mid-year and investor demand at debt sales - and especially of
longer-dated bonds - will be seen as a gauge 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.
"Overall, it was a successful auction. It shows there's
still demand for Portuguese debt," said Lyn Graham-Taylor, fixed
income strategist at Rabobank.
"Perhaps it's not the blockbuster we saw earlier in the year
but not surprising given we're in a little bit more uncertain
environment than we were in early January."
Portuguese 10-year yields were 0.4 basis
points higher at 5.01 percent. Earlier yields reached 5.05
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 sub-investment rating excludes it from major
European bond indexes and leaves it with an investor base that
includes investment funds exposed mainly to emerging markets.
Yields on junk-rated Greek bonds fell for a seventh
consecutive session and outperformed euro zone peers after the
government posted a primary budget surplus in January which was
almost double that reported a year earlier.
Greek 10-year yields were down 16 bps at 7.56
percent while 30-year yields were 11 bps lower at 7.35 percent.
While the market reflects lingering investor concern that
they may not be repaid in full, with 10-year bonds yielding more
than longer-dated ones, the gap has narrowed to 20 bps from 35
bps last week after upbeat data and signs Athens and its lenders
are nearing a deal on its next aid payment.
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.