| LONDON, April 22
LONDON, April 22 Portuguese debt yields dipped
back towards eight-year lows on Tuesday, outpacing core euro
zone government bonds as Lisbon prepares to sell bonds via
auction for the first time in three years this week.
Wednesday's 750 million euro sale of 10-year bonds, which
will follow a series of syndicated bond offerings since early
2013, will help show that the country can finance itself after
its planned exit from an EU/IMF bailout on May 17.
"It is part of Portugal's long road back to becoming full
market participants," said Luca Jellinek, credit strategist at
Credit Agricole, adding that a strong auction would pull
borrowing costs in Portugal, and the rest of the euro zone
Portuguese 10-year bond yields dipped 1 basis
point to 3.73 percent on Tuesday, just above above eight-year
lows of 3.66 percent hit last week.
Other peripheral bond markets also edged back towards
multi-year lows, tightening the gap with core markets, which
came under some early selling pressure.
German 10-year yields - the euro zone benchmark
- opened 2 basis points wider at 1.53 percent.
Portugal's prospects for accessing funding in the markets
were "very promising", the IMF's mission chief for the country,
Subir Lall, after it passed the latest review of its bailout
Portugal's bailout is due to end on May 17, but the analysis
of the last evaluation, to be carried out in May, and tranche
payments will go on until the end of June.
The government has to decide in early May whether to request
funding to support its post-bailout debt market funding. The IMF
said the country's debt outlook "remains fragile", but made no
mention of any need for a precautionary loan.
Portugal will also be hoping its return to normal market
funding will help persuade ratings agencies to pull it out of
Fitch raised the outlook on Portugal's BB+ rating to
positive from negative at the beginning of last month, raising
the chances that the country will be lifted the one notch it
needs to regain investment grade status.
Moody's and Standard and Poor's, which rate Portugal three
and two notches below investment grade respectively, are
scheduled to review the country on May 9.
"I do believe we have turned the corner in terms of ratings.
We are now in an upgrade cycle rather than a downgrade cycle,"
said Peter Schaffrik, head of European Rates and Economics
Research at RBC.
(Editing by John Stonestreet)