* Portugal, Ireland outperform other euro zone bonds
* Portugal's GDP grows a revised 0.6 pct in Q4
* Portuguese premier dismisses new call for debt restructure
By Emelia Sithole-Matarise and Joshua Franklin
LONDON, March 11 Portuguese yields fell to fresh
four-year lows on Tuesday after an upward revision to fourth
quarter GDP growth and the prime minister rejected new calls to
restructure the country's debt.
Junk-rated Portuguese bonds outperformed other euro zone
bonds as the market took a breather after a rally that led
Italian and Spanish yields to historic lows.
Data showed Portugal's gross domestic product grew a revised
0.6 percent in the fourth quarter, accelerating from the
previous quarter's 0.3 percent growth.
Prime Minister Pedro Passos Coelho dismissed as potentially
harmful a call for a "responsible debt restructuring" launched
by 70 veteran political figures, unionists and businessmen.
Coelho said such a plan would send the wrong message to the
country's international lenders who expect it to keep on track
with its fiscal reforms.
His comments and the data accelerated a fall in the
country's bond yields, which hit 2010 lows recently on
increasing optimism Portugal could follow Ireland out of its
EU/IMF bailout later this year.
Yields on 10-year Portuguese bonds were last 6
basis points down at 4.43 percent while two-year yields dropped
15 bps to 1.52 percent.
"Clearly these comments (by Coelho) today have helped
reassure investors and helped to trigger another rally in
Portuguese bonds over this session," said Philip Shaw, chief
economist at Investec.
"There's a wall of cash looking for higher yields given the
low interest rate environment and any good news in these
economies is seen as a justification to buy."
Portuguese 10-year yields have tumbled 1.5 percentage points
since the start of this year and are now way below the 17
percent peaks hit at the height of the euro zone debt crisis in
Although there were lingering concerns that the country's
Constitutional Court might present hurdles for further reforms,
many in the market saw scope for the yields to extend falls in
coming days as investors continue to look for higher returns.
"There are still some question marks there about
(Portugal's) constitutional court. It has in the past blocked
reform issues," said ICAP strategist Philip Tyson. "But (the
market) has performed well. We've seen some successful (debt)
issues and the market is anticipating it exiting without any
Also bucking an upward trend in yields on other peripheral
euro zone bonds on Tuesday, Irish 10-year yields
dipped 3 bps to 3.06 percent after Dublin announced on Monday
its first regular bond auction since it ended its EU/IMF bailout
in December. It will auction 1 billion euros of 10-year bonds on
Greek, Italian and Spanish bond yields all pushed higher,
though Portuguese and Irish debt bucked the trend among
lower-rated bonds. Italian 10-year yields rose 3
bps to 3.41 percent while Spanish equivalents were
1 bps up at 3.32 percent, both pushing off eight-year lows.
"It's more of a pause for breath. I don't think this is the
beginning of any fundamental underperformance just yet... We're
just getting to levels where additional progress might become
increasingly tricky," said ICAP's Tyson.
In core euro zone markets, German 10-year yields
rose 1.5 bps to 1.64 percent. Earlier, Bunds'
yield premium to U.S. Treasuries hit its highest since mid-2006
at 117 bps, according to Reuters data.
The spread has widened since the European Central Bank kept
interest rates unchanged last Thursday while the U.S. Federal
Reserve is scaling back its monetary stimulus.