Bloomberg News

Portugal’s Borrowing Costs Drop at 2 Billion-Euro Bill Sale

July 18, 2012

Portugal sold 1.25 billion euros ($1.5 billion) of 12-month bills as borrowing costs fell to the lowest since 2010 and below the rate paid by Spain yesterday.

The securities due in July 2013 were issued at an average yield of 3.505 percent, the lowest since November 2010, the debt management agency said. That compares with an average yield of 3.834 percent at a previous auction of 12-month bills on June 6. The sale attracted bids for 2.4 times the amount offered, compared with a bid-to-cover ratio of 2.7 in June.

Spain, which is getting a 100 billion-euro bank bailout, yesterday sold 12-month bills at a yield of 3.918 percent. Cyprus on June 25 became the fifth euro country to request a bailout since Greece triggered the European fiscal crisis.

Portugal is cutting spending and raising taxes to comply with the terms of a 78 billion-euro aid plan requested in April 2011 from the European Union and the International Monetary Fund. Prime Minister Pedro Passos Coelho said on March 5 that if the country can’t tap bond markets by September 2013 because of “external reasons,” it would be able to count on continued support from the IMF and the EU.

IMF Report

Borrowing costs also fell at an auction of six-month debt today. The debt agency sold 750 million euros of bills due in January 2013 at an average yield of 2.292 percent, attracting bids for 3.8 times the amount offered. That compares with an average yield of 2.653 percent at a previous auction of six- month bills on June 6, with a bid-to-cover ratio of 4.3.

The IGCP, as the Lisbon-based debt agency is known, said last week that the total indicative amount for today’s auctions was between 1.75 billion euros and 2 billion euros. The IGCP said on July 2 it plans to sell as much as 3.75 billion euros of bills in the third quarter.

The IMF said in a report released yesterday that Portugal plans to issue medium-term notes with maturities of one to five years that are designed for specific creditors as it seeks to regain access to bond markets. The government is also expected to sell treasury bills with maturities of more than one year in the coming months, the Washington-based fund said.

Portugal’s two-year note yield fell 1 basis point to 7.598 percent as of 11:48 a.m. in London today. Ten-year bond yields rose 11 basis points to 10.56 percent.

To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net


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