Bloomberg News

Portugal’s Borrowing Costs Fall at Bill Sales; Demand Drops

February 02, 2012

(Updates with total amount of bills sold this year in seventh paragraph. For more on the euro crisis, click on EXT4.)

Feb. 1 (Bloomberg) -- Portugal’s borrowing costs declined at a sale of 1.5 billion euros ($2 billion) of bills even as demand for the securities dropped.

The country sold 750 million euros of bills due in July 2012 at an average yield of 4.463 percent, the debt management agency said today. That compares with an average yield of 4.74 percent at a previous auction of similar securities on Jan. 18. The auction attracted bids for 2.65 times the amount sold, compared with a bid-to-cover ratio of 2.97 in January.

Portuguese yields have fallen for two consecutive days, the 10-year yield climbed to a euro-era record on Jan. 30, as concern eased that investors in the nation’s securities may be forced to take losses in the event of a Greek debt-swap deal.

“Portugal managed to sell about 1.5 billion euros worth of bills without much incident,” UBS AG analyst Geoffrey Yu wrote today in an e-mailed report. “Its spreads over benchmark have also declined.”

Portuguese two-year notes jumped, with yields 108 basis points lower at 19.47 percent at 12:57 p.m. London time. Ten- year bonds also climbed, pushing the yield down 97 basis points, or 0.97 percentage point, to 15.43 percent. The extra yield investors demand to hold the 10-year securities instead of benchmark German bunds fell 1 percentage point to 13.61 percent.

The debt agency also sold 750 million euros of three-month bills due in May at an average yield of 4.068 percent, attracting bids for 2.8 times the amount offered. That compares with an average yield of 4.346 percent at a previous auction of three-month bills on Jan. 18, and a bid-to-cover ratio of 4.1.

The IGCP, as the debt agency is known, said on Jan. 26 that the range for today’s auctions was between 1.25 billion euros and 1.5 billion euros. Including today’s auctions, Portugal has sold 5 billion euros of bills this year. The IGCP said on Dec. 29 that the total indicative amount of bill auctions planned for the first quarter of 2012 was as much as 6.5 billion euros.

--Editors: Daniel Tilles, Nicholas Reynolds

To contact the reporters on this story: Anabela Reis in Lisbon at areis1@bloomberg.net; Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net


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