Portuguese Bonds Bear Brunt of Selloff as Country Plans Issuance

Portuguese government bonds, the worst performers in the euro area in the first quarter, bore the brunt of Tuesday’s selloff of higher-yielding assets, with the 10-year securities sliding the most in more than two months.

The decline in the nation’s 10-year bonds on Tuesday exceeded that of similar-maturity Greek debt, which has been driven lower as that country’s talks with creditors struggled to avoid acrimony, threatening to reignite speculation about a default and exit from the euro area. Portugal’s bonds lost 1.3 percent between Dec. 31 and March 31, according to Bloomberg World Bond Indexes.

“Its been a difficult day for risky assets,” said Peter Chatwell, head of rates strategy at Mizuho International Plc in London. “This would naturally exert some spread-widening pressure onto peripherals, but in addition to that a dual tranche of 2022 and 2045 Portuguese bonds has been mandated, so the market has had to adjust for this extra supply into what has already been a challenging climate.”

Portugal appointed banks to manage the reopening of 2022 and 2045 bonds, subject to market conditions, according to a person familiar with the matter.

Portugal’s 10-year bond yield jumped 21 basis points, or 0.21 percentage point, to 3.15 percent as of 4:45 p.m. London time, the biggest increase since Feb. 11. The 2.785 percent security due July 2026 fell 1.830, or 18.30 euros per 1,000-euro face amount, to 97.64. Greece’s 10-year yield rose 19 basis points to 9.07 percent.

Yields on similar-maturity bonds of Spain and Italy both rose three basis points.

BlackRock Lawsuit

BlackRock Inc. is leading a group of Novo Banco SA bondholders suing the Bank of Portugal after the central bank decided to impose losses on their securities. The money manager filed the lawsuit on Friday, according to Portuguese court documents.

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