Portugal’s cost of borrowing for 12 months dropped as it sold 700 million euros ($938 million) of bills after the government resolved a rift in the ruling coalition last month.
The nation auctioned securities due in August 2014 at an average yield of 1.619 percent, down from 1.72 percent at the previous sale of similar-maturity bills on July 17. The auction attracted bids for 2.2 times the amount offered, versus a bid-to-cover ratio of 1.8 times last month, the Lisbon-based debt management agency said.
The government also sold 300 million euros of three-month bills at an average yield of 0.766 percent, versus 0.743 percent on April 17. Bidding dropped to 3.4 times from 4.8 times.
Portugal’s 12-month borrowing costs climbed to the highest in nine months in July before President Anibal Cavaco Silva endorsed Prime Minister Pedro Passos Coelho’s plan to keep his coalition government together. The country sold 10-year debt in May for the first time in more than two years as part of efforts to regain full market access following its bailout in 2011.
The nation plans to resume regular issuance of bonds “only if market conditions are conducive,” the debt agency said on July 12. Financing needs for 2013 are “fully covered” and in the second quarter the debt agency started to “pre-fund” for borrowing needs in 2014, according to the agency.
Two-year notes rose today, while 10-year securities declined. The two-year yield dropped four basis points, or 0.04 percentage point, to 3.66 percent at 1:17 p.m. in London. The 10-year yield increased seven basis points to 6.41 percent.
The 10-year rate climbed to a seven-month high of 8.11 percent on July 3 after Foreign Affairs Minister Paulo Portas said he quit the government in protest at its budget policy.
The IGCP, as the debt agency is known, said on Aug. 16 the total indicative amount for today’s auctions was between 750 million euros and 1 billion euros.