Portugal Sees DBRS Maintaining Nation’s Investment-Grade Rating

  • Fitch, Moody’s, S&P all rate Portugal as non-investment grade
  • DBRS to review Portugal’s sovereign rating on Oct. 21

Portuguese Secretary of State for Treasury Ricardo Felix said he expects DBRS Ltd. will continue to rate his nation’s debt as investment grade, securing eligibility for the European Central Bank’s bond purchase program.

“We are pretty confident from the conversations we had with DBRS that the rating will be maintained and the outlook will be maintained,” Felix said on Thursday from New York in a Bloomberg Television interview with Vonnie Quinn and Nejra Cehic. “We have been in close contact.”

Portuguese government debt is rated below investment grade by credit ranking companies Fitch Ratings, Moody’s Investors Service and S&P Global Ratings. On April 29, DBRS kept Portugal’s rating at BBBL, its lowest investment grade, and maintained the stable trend. DBRS is due to review Portugal’s rating again on Oct. 21, a week after the government hands in its 2017 budget proposal.

Felix reaffirmed that the government targets a budget deficit below 2.5 percent this year and below 2 percent in 2017. Portugal’s debt-to-gross domestic product ratio may decline by “close to” 3 percentage points in 2017, according to Felix. There may be early repayments of the International Monetary Fund’s bailout loan in 2017, he said.

The secretary of state said he’s been visiting different investors in the U.S.

“Most of the pension funds and the hedge funds suggest that their preferred maturities are in the five- to 10-year period,” Felix said. “But they are open to different maturities as soon as rating conditions improve for Portugal, which is something that might happen in the next year as economic growth starts accelerating.”

Portugal’s 10-year bond yield was at 3.5 percent on Thursday, higher than about 2.6 percent at the start of 2016.

“The increase is created from uncertainties, some of them on the external front and some of them on the internal front, but that will dissipate soon, particularly with DBRS, then the budget, and the deficit for 2016 being disclosed,’’ Felix said.

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