* Portugal to resume bond auctions after 3-year hiatus
* Lisbon selling up to 750 mln euro of 10-year bonds
* Yield-hungry investors seen snapping up the debt
By Emelia Sithole-Matarise
LONDON, April 23 Portugal's government bond
yields hit eight-year lows before an auction on Wednesday of
10-year debt, on optimism around the country's full return to
debt markets after three years.
Investor focus was also on preliminary euro zone
manufacturing data, with the French survey showing the private
sector expanded at a much slower rate in April, underlining the
fragility of the recovery in the euro zone's No. 2 economy and
keeping alive speculation that the European Central Bank will
take further stimulus measures, including asset purchases.
Against this backdrop, many in the market expect the
Portuguese sale of up to 750 million euros of debt to be snapped
up by yield-hungry investors who have driven borrowing costs of
the euro zone's weaker states to multi-year lows this year.
The auction follows a series of syndicated bond sales since
early last year and will help show the country can finance
itself after its planned exit in May from a 2011 bailout. Lisbon
aims to auction bonds once or twice each quarter going forward.
Portuguese 10-year yields fell 6 basis points
(bps) to 3.64 percent and further post-sale falls were expected.
"It's (the auction) going to fly. It's a very small auction
and there's still demand for yield out there. It all feels okay.
We think that probably 3.5 percent for the 10-year yield in
Portugal is viable," one trader said.
Portugal's bailout is due to end on May 17, and focus is now
on whether it will request a credit line to support its
post-bailout debt-market funding.
Its return to normal market funding could also help persuade
ratings agencies to pull it out of junk territory, some
"The ratings from the three main agencies are still
relatively deep in non-investment grade territory. This leaves
scope for positive rating news at the upcoming rating reviews by
Standard & Poor's and Moody's scheduled for May 9," Commerzbank
strategists said in a note.
Other euro zone bonds were also firmer, with the core market
clawing back the previous day's losses on the weaker French
PMIs. German 10-year yields, the euro zone
benchmark, were 2 bps lower at 1.53 percent while French
equivalents were 1 basis point down at 2 percent FR10YT-RR.
(Editing by Louise Ireland)