Portugal Lights Up Europe’s Bond Market as Sale Exceeds Target

Updated on

Portugal sold more bonds than it planned at an auction of government debt, helping spark gains in peripheral euro-zone debt.

Portugal’s 10-year securities reversed an earlier decline after the nation exceeded the target in its first bond sale since Greece reached a deal with its creditors. German bunds rose as stocks and commodities declined.

“It’s a good sign that, even though the markets are a bit defensive, we saw OK demand at the auction,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen.

The yield on Portuguese 10-year bonds fell three basis points, or 0.03 percentage point, to 2.61 percent as of the 5 p.m. close in London, after earlier climbing as much as 10 basis points. The 2.875 percent security due in October 2025 rose 0.265, or 2.65 euros per 1,000-euro ($1,088) face amount, to 102.315.

IGCP, Portugal’s debt agency, sold 1.5 billion euros of securities due in 2020 and 2037, the longest-maturity bond the country has auctioned since its own bailout request in 2011. The indicative range for the sale was 1 billion euros to 1.25 billion euros.

Portugal has Europe’s best-performing sovereign-debt market over the past six months through Tuesday, according to Bloomberg World Bond Indexes. It returned 1.7 percent in the period, compared with a 1.3 percent loss on German securities.

The Stoxx Europe 600 Index fell 0.6 percent and the Bloomberg Commodity Index slid 0.8 percent as the drop in risk appetite also supported core bonds.

Germany’s 10-year bund yield fell three basis points to 0.75 percent and France’s also slipped three, to 1.05 percent.

“There is probably some risk-off hanging around from yesterday related to the weaker-than-expected earnings from the U.S.,” said Luca Cazzulani, senior fixed-income strategist at UniCredit SpA in Milan.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE