Channel NewsAsia

Portugal to test market with 10-year bond issue  

Portugal is preparing an issue of 10-year bonds, in what will be a key test of whether it can cleanly exit its bailout in May.

LISBON: Portugal is preparing an issue of 10-year bonds, the state debt management agency said on Monday, in what will be a key test of whether it can cleanly exit its bailout in May.

A spokesman for the IGCP agency told AFP that six banks had been mandated to handle the syndicated issue, which will take place in the near future when market conditions permit.

A successful placement of 10-year bonds would demonstrate that Portugal can finance itself at affordable rates on the markets when it exits its three-year 78-billion-euro ($106-billion) bailout from the EU and IMF ends in May.

Portugal aims to seize on improving market sentiment which has seen the rate of return on its 10-year bonds fall below five percent on the secondary market, from above six per cent at the beginning of the year.

Last month, Portugal enjoyed strong demand for an issue of 5-year bonds, raising 3.25 billion ($4.4 billion) euros at a lower rate of 4.657 per cent.

That issue, plus a voluntary bond swap carried out at the end of last year, means Portugal's remaining funding needs for the year is just 3.85 billion euros.

During its last auction of 10-year bonds in May 2013, Portugal raised three billion euros at 5.669 per cent with demand at over 10 billion.

Portugal has not made a final decision as to whether or not it will seek a precautionary arrangement from the EU's ESM bailout fund.

Such a precautionary arrangement would allow the European Central Bank to step in and buy Portuguese bonds in case of a deterioration on the debt market.

Tweet Photos, Videos and Update on this Story to  #cna