Portugal is selling 3.25 billion euros ($4.4 billion) of five-year notes in its first offering of coupon-bearing debt since May as signs of economic recovery spur a rally in the region’s higher-yielding fixed-income assets.
The sale through banks attracted about 11 billion euros of orders, Finance Minister Maria Luis Albuquerque told reporters in Lisbon. The additional 4.75 percent notes due in June 2019 are being sold at a yield of 4.657 percent, the debt agency said in a statement. That compares with 4.891 percent at a sale of notes maturing in October 2017 held in January last year. The amount raised today represents about half of the nation’s estimated funding needs for 2014.
“Portugal will have no problem raising the remaining funds it needs this year from the bond markets,” said Justin Knight, a European rates strategist at UBS AG in London. Today’s “syndication will probably provide much of the 7.1 billion euros needed to be raised from the private sector in 2014,” he wrote in a research note before the details were confirmed.
With its 78 billion-euro rescue program from the European Union and International Monetary Fund due to end in June, Portugal is following Ireland in a return to debt markets as sovereign bonds rally across the region. Ireland last month became the first nation to exit a rescue program since the euro area’s debt crisis began in 2009. Ireland entered its 67.5 billion-euro bailout in November 2010, six months before Portugal got its package.
“It’s a very successful sale,” Albuquerque said. “It went very well and we are very satisfied with the result.”
The yield on Portugal’s 4.45 percent note due in June 2018 fell three basis points, or 0.03 percentage point, to 4.06 percent at the 5 p.m. close of trading in London after falling to 3.914 percent yesterday, the lowest for a five-year benchmark since August 2010. The rate has fallen from as high as 7.66 percent in July and a record 23.41 percent in January 2012.
Portugal last sold 10-year bonds in May at a yield of 5.669 percent. The yield of 10-year securities in the secondary market declined to 5.19 percent that month, the lowest since 2010.
The sale of five-year notes in January last year was the first since the country requested a bailout in 2011. The government pays 3.2 percent on its bailout loans.
European nations frequently hire banks when they offer new securities in order to boost potential demand for the debt.
Portugal is seeking to exit its bailout without needing another rescue and held a 6.64 billion-euro debt exchange on Dec. 3 to push back repayments on securities maturing in 2014 and 2015 into 2017 and 2018.
The nation was planning to sell bonds early in 2014 as investors from Scandinavia and the euro area had returned to its market, Joao Moreira Rato, head of the nation’s debt agency, said in a Dec. 6 interview. The sale will help address this year’s funding needs of about 7 billion euros, he said.
The debt agency IGCP said yesterday the country had hired Barclays Plc, Caixa-Banco de Investimento SA, Goldman Sachs Group Inc., HSBC Holdings Plc, Morgan Stanley and Societe Generale SA to manage the sale of five-year notes.
Bonds of Europe’s higher-yielding nations are rallying this year amid optimism the region’s economy is recovering. Spain sold a new five-year note to yield an average 2.382 percent, the lowest for that maturity at an auction since Bloomberg started compiling the data in 2005.
Portugal’s securities are rated junk by Standard & Poor’s, Fitch Ratings and Moody’s Investors Services. New York-based Moody’s is scheduled to announce possible sovereign credit actions on Portugal tomorrow and S&P on Jan. 17.
Moody’s revised its bond rating outlook for Portugal to stable from negative on Nov. 8, citing an improving fiscal position and economic outlook. The nation’s debt is rated Ba3, or three levels below investment grade, by the company.
Portugal’s securities returned 12 percent in the 12 months through yesterday, the fourth best of 15 euro-area debt markets, according to Bloomberg World Bond Indexes. Greece was the best performer, rising 43 percent.