Portugal’s Borrowing Costs Drop to Lowest Since at Least 2005

Portugal’s borrowing costs fell to the lowest in at least nine years as the government sold 930 million euros ($1.3 billion) of 12-month bills.

The securities due in March 2015 were issued at an average yield of 0.602 percent, the country’s debt management agency said. That compares with an average yield of 0.75 percent at a previous auction of 12-month bills on Feb. 19 and is the lowest rate for comparable-maturity debt since at least March 2005. The auction attracted bids for 1.68 times the amount allotted, compared with 2.12 times in February.

The debt agency also sold 320 million euros of six-month bills due in September 2014 at an average yield of 0.438 percent, attracting bids for 4.63 times the amount offered. That compares with an average yield of 1.041 percent at a previous auction of six-month bills on June 19 with a bid-to-cover ratio of 2.5.

Portugal is trying to regain full access to debt markets with the end of its 78 billion-euro rescue program from the European Union and International Monetary Fund approaching on May 17. It has raised 6.25 billion euros selling bonds through banks so far this year as signs of economic recovery spurred a rally in higher-yielding European fixed-income assets.

The IGCP, as the debt agency is known, on March 14 said that the total indicative amount for today’s auctions was between 1 billion euros and 1.25 billion euros.

Portugal plans gross bond issuance of between 11 billion euros and 13 billion euros this year, and the debt agency on Jan. 15 said it expects to reintroduce bond auctions in the first half of this year. The country has already started to obtain funding for 2015, the IGCP said on Feb. 11 after completing a sale of 3 billion euros of 10-year bonds.