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Portugal breaks away from bailout with big bond success

Portugal successfully raised 975 million euros (US$1.3 billion) on Wednesday with its first benchmark 10-year debt issue since emerging from a bailout programme in May, but its central bank saw lower growth for 2014.

LISBON: Portugal successfully raised 975 million euros (US$1.3 billion) on Wednesday with its first benchmark 10-year debt issue since emerging from a bailout programme in May, but its central bank saw lower growth for 2014.

The Portuguese treasury exceeded by a wide margin its target of raising 500-750 million euros.

It was able to place the bonds at an interest rate of 3.25 per cent, sharply down from 3.57 per cent when it issued 10-year debt on April 23.

Portugal's central bank however, cut its growth forecast to 1.1 per cent from 1.2 per cent for 2014, saying the move "took into account the information seen in the first quarter of 2014 with a development that is less favourable than expected."

At the same time, it raised its forecast for 2015 to 1.5 per cent from 1.4 per cent while maintaining that for 2016 at 1.7 per cent.

Borrowing costs, or bond yields, for weaker countries in the eurozone have tended to fall further since last Thursday when the European Central Bank cut its three main interest rates, pushing the deposit rate into a negative figure, to ward off the threat of deflation.

A negative deposit rate means that commercial banks in effect pay the central bank if they hold money on deposit rather than push it into the economy.

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