Portugal will seize opportunities to sell more debt after tapping bondmarkets last week for the first time since getting a bailout in 2011, Finance Minister Vitor Gaspar said.
“We can organize an operation at short notice and being a small country that does not set a standard, we will continue to follow market trends and seizing opportunities for further issuance when they occur,” Gaspar said today in a speech at the Goethe University in Frankfurt. “We are not in a particular hurry for the next issuance.”
The country’s refinancing needs in 2014, 2015 and 2016 are “quite substantial,” Gaspar said. The Portuguese debt agency has said it may issue more bonds this year to exchange for notes that are about to mature in an effort to extend its repayment burden. In October, it swapped 3.76 billion euros ($5.1 billion) of securities due in September 2013 for notes of the same value maturing in October 2015.
Portugal’s 10-year yield fell below 6 percent last week for the first time since 2010, encouraging the country to join Ireland in selling bonds via banks this year amid signs Europe’s three-year-old debt crisis is abating. While Portugal continued to sell bills after requesting a bailout in April 2011, it hadn’t offered bonds until last week.
Portugal on Jan. 23 sold 2.5 billion euros of five-year bonds through banks, the first offering of that maturity since February 2011. The 4.35 percent bonds due in October 2017 were allotted at a yield of 4.891 percent. About 93 percent were sold to overseas investors, including 33 percent to the U.S., 29 percent to the U.K. and 9 percent to Asia, the debt agency said last week. About 60 percent were taken up by asset managers and 24 percent by hedge funds.
Today, the yield on the Portuguese five-year note fell 4 basis points, or 0.04 percentage point, to 4.97 percent at 1:44 p.m. in London. Ten-year bond yields dropped two basis points to 6.06 percent. The extra yield investors demand to hold Portugal’s 10-year bonds instead of German bunds narrowed to 4.36 percentage points from more than 16 percentage points on Jan. 31, 2012.
“We are past the mid point of the economic adjustment program so it’s appropriate to talk about exiting the program and regaining market access,” Gaspar said today. He said there was no calendar for debt sales.
Portugal has to meet a 5.8 billion-euro September 2013 bond redemption without relying on the European Union-led rescue program, which extends until the middle of 2014. The International Monetary Fund forecasts debt will peak at 122.3 percent of gross domestic product in 2014, assuming that Portugal will return to bond markets in the middle of this year and that yields on its medium- and long-term debt will decline to 5 percent in the medium term from 7 percent in 2013.
Portugal pays about 3.2 percent interest on aid funding, Gaspar said last month.
“We’re interested in rebuilding all of Portugal’s yield curve, which will imply issuing 10-year debt at a given time and when adequate,” Secretary of State for Treasury Maria Luis Albuquerque said last week. The country’s securities are rated junk by Standard & Poor’s, Fitch Ratings and Moody’s Investors Service.
European Central Bank President Mario Draghi last year pledged to buy bonds of distressed euro nations if they ask the region’s rescue fund for a bailout and sign up to conditions. The plan, dubbed Outright Monetary Transactions, is also designed to help program countries once they regain market access.
The ECB’s OMT has had a “very strong” contribution on the improved situation in the euro-area, Gaspar said today. It’s “premature” to say the crisis is over, he said.
Separately, Gaspar said the government will reach a decision about the privatization of airline TAP SGPS SA in the next few months. The government on Dec. 20 shelved the sale of TAP after rejecting the sole offer from Brazilian investor German Efromovich’s Synergy Group.