BPI Is Purchasing Portuguese Bills, Not Bonds, Ulrich Says

Banco BPI SA Chief Executive Officer Fernando Ulrich
Banco BPI SA Chief Executive Officer Fernando Ulrich. Photographer: Mario Proenca/Bloomberg

Banco BPI SA, Portugal’s fifth-biggest bank, has been buying Portuguese treasury bills in quantities that aren’t “very large so far,” Chief Executive Officer Fernando Ulrich said.

The lender hasn’t been purchasing government bonds in the secondary market as it already has exposure to the country’s debt, Ulrich said today in an interview.

“I think investors that are less exposed to Portugal maybe have more room to be more active,” he said.

Portugal has already sold 8 billion euros ($10.5 billion) of bills this year, including 12-month securities. That’s more than planned after the government debt agency said on Dec. 29 that the total indicative amount of bills to be sold in the first quarter of 2012 would be as much as 6.5 billion euros. The state approved on Feb. 9 a change to the maximum maturity allowed for new issues of treasury bills, which now can be as long as 18 months.

“We will definitely look at it very carefully and with interest,” Ulrich said about possible issues of bills with longer maturities such as 18-month securities.

Portugal’s financial-aid plan assumes the country will regain access to medium- and long-term sovereign-debt markets by late 2013, the International Monetary Fund said in December. The government is cutting spending and raising taxes to try to curb its debt.

Portugal’s ‘Discipline’

Portugal’s 10-year yield was at 13.9 percent at 1:24 p.m. in London, up from 7.48 percent a year ago. The extra yield investors demand to own the nation’s bonds rather than Germany’s widened 1.1 percentage points to 12.04 percentage points since the European Central Bank announced its program of three-year loans to banks on Dec. 8. Italy’s spread shrank 124 basis points to 3.2 percentage points, and Spain’s narrowed 53 basis points to 3.26.

“Quite frankly, I don’t see why we should be treated by the market worse than Italy or Spain,” Ulrich said. “I hope that with time, with Portugal keeping its discipline, the market will finally and gradually recognize the merits of our homework and yields will come down.”

The ECB approved on Feb. 9 the temporary use of additional collateral in funding operations by seven euro-area members’ central banks including Portugal. It offered loans of up to three years against eligible collateral on Feb. 28 that can be used to finance purchases of assets including higher-yielding government debt.

Ulrich said that BPI applied for 2 billion euros of three-year loans from the ECB last week.

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