Portugal's Borrowing Costs Increased at Today's Auction of July 2011 Bills
Portugal’s borrowing costs rose at an auction of 1.253 billion euros ($1.61 billion) of 12-month bills after yields surged in April and May amid Europe’s debt crisis.
The securities due July 21, 2011 were issued at an average yield of 2.452 percent, the country’s debt management agency said today in Lisbon. That compares with an average yield of 1.036 percent at a March 17 auction of 12-month bills.
“It was a pretty reasonable auction,” said Huw Worthington, a fixed-income strategist at Barclays Capital in London. Costs are higher but it’s “not an unsustainable level to pay for its debt.”
Moody’s Investors Service cut Portugal’s credit rating two levels this month, citing prospects for weak economic growth and growing debt. The government has raised taxes and cut spending in an attempt to rein in a budget deficit of 9.3 percent of output last year. The Finance Ministry on July 2 said that it aims to narrow the shortfall a year earlier than previously planned and meet the European Union’s 3 percent limit in 2012.
Borrowing costs among the euro-region’s high-deficit nations have dropped from peaks in May after the EU devised a 440 billion-euro financial backstop in return for government- austerity measures.
Today’s auction attracted bids for 1.3 times the amount offered, compared with a bid-to-cover ratio of 3.2 in the March auction. The IGCP, as the debt agency is known, on July 15 said the indicative amount for today’s auction was 1.25 billion euros.