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Portugal’s Borrowing Costs Rise to 11-Month High at Auction

Portugal’s borrowing costs rose to the highest level in 11 months at an auction of 450 million euros ($610 million) of three-month bills.

The securities due in January 2014 were issued at an average yield of 1.159 percent, the country’s debt management agency, or IGCP, said in Lisbon today. That compares with an average yield of 1.081 percent at a previous auction of three-month bills on Sept. 18 and is the highest since Nov. 21, when the securities were sold to yield 1.936 percent. The auction attracted bids for 1.8 times the amount offered, the same bid-to-cover ratio as in September.

Portugal is trying to regain full access to debt markets as the end of a 78 billion-euro rescue plan from the European Union and the International Monetary Fund is approaching in June. The country’s 10-year bond yield has climbed since May, when borrowing costs were at the lowest since 2010 and the country last sold bonds.

Portugal’s net financing needs in 2014 will be 11.7 billion euros, Secretary of State for Treasury Isabel Castelo Branco said yesterday. The government plans gross bond issuance of 10.5 billion euros next year, while financing from the so-called troika will be 7.9 billion euros, she said.

The yield on two-year notes fell 9 basis points, or 0.09 percentage point, to 4.15 percent at 11:22 a.m. in London. Ten-year bond yields slipped 2 basis points to 6.2 percent. The country, whose debt is ranked below investment grade by all three major rating companies, pays 3.2 percent on its bailout loans.

Today, the IGCP also sold 1.05 billion euros of nine-month bills due in July 2014 at an average yield of 1.714 percent, attracting bids for 1.5 times the amount offered.

The agency said on Oct. 11 that the total indicative amount for today’s auctions was between 1.25 billion euros and 1.5 billion euros.

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