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Portuguese yields edge up on bond sale; Lisbon eyes bailout exit
February 11, 2014 / 5:21 PM / 4 years ago

Portuguese yields edge up on bond sale; Lisbon eyes bailout exit

* Lisbon raises 3 bln euros in tap of 2024 bond

* Sale is further step towards regaining regular market access

* Greek yields fall again after encouraging budget data

By Joshua Franklin

LONDON, Feb 11 (Reuters) - Portuguese government debt yields edged up on Tuesday as investors made room for fresh paper from a chunky bond sale that took Lisbon closer to exiting its international bailout later this year.

Lisbon raised 3 billion euros from the syndicated offer of a 2024 bond first issued last year, with 9.5 billion euros of orders placed.

The relatively large size of the sale prompted investors to reshuffle their portfolios, leading to some upward pressure on yields in secondary markets.

Some traders and analysts saw scope for yields to fall back in coming weeks once the initial supply shock faded, given a well-bid sale of a five-year bond in January was a catalyst for hefty Portuguese bond gains this year.

Portugal’s 78-billion euro EU/IMF bailout is due to end by mid-year and investor demand at debt sales - and especially of longer-dated bonds - will be a gauge of Lisbon’s ability to secure funding without a new international safety net.

“(Portugal) is progressively regaining its full-market access,” said Cyril Regnat, a strategist at Natixis in Paris.

Portuguese 10-year yields were 6 basis points higher at 5.06 percent. They were some 25 bps above the 3-1/2 lows hit in January but still about one percentage point below end-2013 levels.

Demand for its bonds so far been driven by improved growth expectations and a benign environment in the euro zone debt market, supported by ultra-easy European Central Bank policy.

But analysts said Portugal is not yet on the Irish exit path.

Dublin exited its bailout at the end of last year without needing an international safety net. Its benchmark borrowing costs were roughly 3.5 percent at the time, a distant prospect for Portugal.

“(With this sale) there is more confirmation that there is a good chance for Portugal to leave the exit programme relatively smoothly,” said Rainer Guntermann, a rate strategist at Commerzbank in Frankfurt. “But at yield levels close to 5 percent it’s still a bit of a shaky situation.”

The downward trend in Portuguese yields may also be tempered by lingering uncertainty in emerging markets after the recent sell-off. Portugal’s junk rating excludes it from major European bond indexes and leaves it with an investor base that includes investment funds exposed mainly to emerging markets.


Yields on junk-rated Greek bonds fell for a seventh consecutive session and outperformed euro zone peers after the government posted a primary budget surplus in January which was almost double that reported a year earlier.

Greek 10-year yields were down 23 bps at 7.50 percent while 30-year yields were 15 bps lower at 7.31 percent.

While the market reflects lingering concern from investors that they may not be repaid in full, with 10-year bonds yielding more than longer-dated ones, the gap has narrowed to 20 bps from 35 bps last week after upbeat data and signs Athens and its lenders are nearing a deal on its next aid payment.

German 10-year Bund yields were little changed at 1.69 percent after new Federal Reserve Chair Janet Yellen suggested the U.S. central bank was on track to keep reducing its policy stimulus. ID:nL5N0LG35L]

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