* Portugal, Ireland pre-fund lumpy upcoming repayments
* Portugal sells first dollar bond since 2010
* Ireland bond swap cuts 2016 redemption by 2 bln euros
* Some strategists say no rush with low rates
(Recasts with detail on Irish, Portuguese bond deals, moves in
By Emelia Sithole-Matarise and John Geddie
LONDON, July 2 Portugal and Ireland, two of
Europe's most indebted countries, took advantage of
historically low borrowing costs to fund near-term debt
repayments ahead of schedule on Wednesday.
Portugal was poised to raise $4.5 billion from the sale of
its first dollar bond in more than four years as it set about
raising funding for next year. The deal was due to price later
in the day.
Ireland, meanwhile, cut its funding requirement for 2016 by
2 billion euros through a bond swap and buyback.
"Primary markets are wide open and as we are seeing
peripheral treasuries are trying to get as much ahead as they
can in terms of their issuance," said Commerzbank strategist
"The overall positive backdrop is not going to change given
this negative ECB rates policy from the ECB. The hunt for
(yield) pickup will continue."
Around 37 percent of Portugal's 138 billion euros of debt
falls due by the end of 2016, while around 23 percent of
Ireland's 144 billion euros also matures during that period,
according to Thomson Reuters data.
Both countries had to be bailed out just over three years
ago as investors, fearing neither would be able to service their
massive debt loads, turned their backs.
Even though both countries' debts now stand at euro era
highs of over 120 percent of economic output, a commitment by
the European Central Bank to do "whatever it takes" to save the
euro zone, and hard-won bailout exits earlier this year, have
seen investors return.
Ireland began reducing its post-bailout funding requirements
with a bond switch in January 2012 that marked its return to the
debt markets, following up with a second switch later that year.
Other peripheral euro zone countries have also used bond
swaps and buybacks to reduce their funding needs as their
borrowing costs slid to historic lows.
Ireland's borrowing costs over 10 years dipped to fresh
record troughs while Portugal's hit their lowest since 2006 last
month, after the ECB announced a raft of measures to shore up
weak economic growth and counter the threat of deflation.
Having already raised all its funding needs for 2014,
Portugal's sale of a new 10-year dollar bond was its first in
the currency since March 2010.
The deal attracted over $10 billion of demand, prompting
Lisbon to more than double its initial size to $4.5 billion. It
was set to price around 265 basis points over the 10-year U.S.
Treasury, which equates to a yield of around 5.2
percent at current market rates.
While the money raised will help offset some of Portugal's
upcoming repayments, Citi's global head of rates strategy
Alessandro Tentori said the country appeared in no desperate
rush to lock in low rates that will likely remain for some time.
"Market levels are what they are and they have to rebuild a
curve and come back to the market," said Tentori.
Bond investors appeared unfazed by an investigation into
three holding companies of the country's biggest bank, Banco
Espirito Santo, which had triggered some volatile trading in the
sovereign bonds early this week. Investors appeared to put trust
in the government's conclusion that there was no threat to
financial stability or public accounts from the probe.
Portugal's 10-year bond yields were 3 basis
points up at 3.65 percent, with the debt outperforming most of
the euro zone debt market which was on the back foot after
forecast-beating U.S. ADP private sector employment data
prompted some profit-taking.
Irish 10-year yields were 4 bps higher at 2.41 percent.
while Germany yields, the benchmark
for euro zone borrowing, were up by a similar amount at 1.29
(Editing by Jeremy Gaunt)