Bonds News

UPDATE 1-Portugal to focus on deficit cuts to avoid IMF-Finmin

* Portugal bond premiums at euro highs

* Minister sees yield trend temporary

* Reiterates government to meet deficit targets

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LISBON, Nov 10 (Reuters) - The Portuguese government must focus on cutting the budget deficit to avoid having to ask for financial aid from the International Monetary Fund, Finance Minister Fernando Teixeira dos Santos said on Wednesday.

Risk premiums on Portuguese bonds hit euro lifetime highs this week as investors worry that the country will fail to reign in its budget deficit and debt.

“We have to concentrate on reducing the budget deficit in order to keep the IMF scenario away,” Teixeira dos Santos told reporters. “We have to take the measures, as hard as they may be, that are necessary to reach this objective” of cutting the budget deficit, he said.

The minister repeated that the government would meet its goal of reducing the deficit to 4.6 percent of gross domestic product next year from an estimated 7.3 percent in 2010 and 9.3 percent last year, thanks to an austere budget presented to parliament.

He said passage of the budget was now assured after an agreement with the opposition Social Democrats, which the government needs as it does not have a majority in parliament.

He also said that yields demanded by investors at a bond auction on Wednesday were high but reflected jittery market conditions, which the government considers temporary.

“Aware of our debt levels and with a responsible attitude, we cannot ignore the consequences and difficulties the country would face if interest rates remain high,” he said.

The yield on the country’s 10-year government bonds is currently at 7 percent -- a level the minister had previously said could require the country to seek financial help from international institutions. But the government said last week it had no plans to resort to foreign help despite rising yields. (Reporting by Sergio Goncalves; writing by Axel Bugge; editing by Giles Elgood)