Portugal to Announce Measures for Returning to Markets

Portugal will “soon” announce measures aimed at returning to bond markets after its bailout two years ago, Prime Minister Pedro Passos Coelho said.

“We will seek to issue long-term debt and obtain from our partners the necessary support that will allow us to return to the market in a more successful way,” Coelho said today at a news conference in Paris with French President Francois Hollande. “The countries that are complying with their programs and presenting merit in the way the measures are being developed should be supported in their aim of returning to the market.”

Yields have dropped as Portugal raises taxes to meet the terms of a 78 billion-euro ($104 billion) aid plan requested from the European Union and the International Monetary Fund in April 2011. The country aims to regain access to markets by September, and Coelho has said if “external reasons” make that impossible, it could count on continued IMF and EU support.

Portugal’s borrowing costs fell yesterday at a sale of a combined 2.5 billion euros of three-, 12- and 18-month bills in the first auction of 2013. The debt agency sold 12-month securities at an average yield of 1.609 percent, the lowest since April 2010.

Yields peaked a year ago, when Standard & Poor’s cut Portugal’s credit rating to non-investment grade, or junk, following Fitch Ratings and Moody’s Investors Service.

Spread Narrows

The difference in yield that investors demand to hold Portugal’s 10-year bonds instead of German bunds has narrowed to 4.6 percentage points from 16 percentage points on Jan. 31, 2012. Portugal’s two-year note yield has dropped to 3.48 percent, while 10-year bonds yield 6.21 percent. The cost of the aid program financing to Portugal is about 3.2 percent, Finance Minister Vitor Gaspar said on Dec. 18.

The debt agency said on Jan. 11 that net borrowing needs will be 11.5 billion euros this year, with financing from issuing treasury bills of about 5 billion euros. Portugal sold 22 billion euros of bills in 2012, though it hasn’t auctioned bonds since requesting the bailout.

Portugal must meet a 5.8 billion-euro redemption of bonds maturing in September without relying on the EU-led rescue program, which extends until the middle of 2014. The debt agency on Oct. 3 exchanged 3.76 billion euros of securities due in September 2013 for the same value of notes maturing in October 2015, reducing its 2013 repayment burden.

ECB Support

European Central Bank President Mario Draghi said on Sept. 6 that debt purchases may be considered for euro-area countries now under bailout programs, such as Greece, Portugal and Ireland, when they regain bond-market access. The measure, called Outright Monetary Transactions, “would not apply to countries that are under a full-adjustment program until full-market access will be obtained,” Draghi said on Oct. 4. “The OMT is not a replacement” for a lack of primary-market access.

Ireland’s National Treasury Management Agency sold about 2.5 billion euros of bonds earlier this month in its first sale through a banking syndicate in three years.

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