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By John Geddie
LONDON, Jan 8 (IFR) - Portugal is preparing to increase one of its bonds as it looks to capitalise on investor demand for peripheral sovereign issues and prove it can finance itself ahead of its planned exit from its bailout programme.
Portugal’s bond issue will come just two days after Ireland wowed the market with a EUR3.75bn 10-year bond, its first issue since it exited its own bailout programme last month.
Nearly EUR14bn orders were recorded for Ireland’s debt sale, which fuelled a rally across all peripheral eurozone countries.
Yields on Portugal’s benchmark 10-year bond have rallied over 50bp since the start of the year, to hit a low of 5.46% earlier on Thursday.
“It is all part of the confidence-building process in Portugal,” said Rainer Guntermann, rates strategist at Commerzbank.
“Portugal needs to issue in the market and take advantage of the momentum that the Irish deal has created.”
Portugal, rated Ba3/BB/BB+, mandated Barclays, CaixaBI, Goldman Sachs, HSBC, Morgan Stanley and Societe Generale to sell additional 4.75% June 2019 euro-denominated bonds, a deal which lead managers said will be launched on Thursday.
The tap is expected to raise around EUR2-2.5bn, said market sources, in line with Portugal’s EUR2.5bn tap of its 4.35% October 2017 bond in January 2013.
The country’s international lenders approved its progress in the latest review of its bailout in mid-December, which it could exit this year, economists say, but it may need some kind of precautionary loan from creditors before standing on its own two feet.
Lisbon swapped EUR6.6bn euros of bonds maturing in the next two years for longer-dated paper in December, but has plans to issue a further EUR10.5bn of new debt in 2014. (Reporting by John Geddie, Editing by Helene Durand, Julian Baker)