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Portugal sells 18-month bonds for first time since 2011 bailout

Apr 4, 2012, 14:51 GMT

Lisbon/Brussels - Portugal raised 1 billion euros (1.33 billion dollars) Wednesday in its first 18-month bond sale since becoming an international bailout recipient last year.

The average yield on the securities was 4.53 per cent, according to the country's public debt agency, IGCP.

In addition, the country achieved a yield of 2.9 per cent on 500 million euros of government debt maturing in six months' time.

This was a notable drop since the last such auction, six months ago, when Portugal had to offer rates of 4.33 per cent.

Demand for securities was significantly higher than supply in both auctions, the IGCP said, a day after the European Commission praised Portugal's 'remarkable' measures to slash public debt.

However, the European Union executive also admitted that the country might need extra help, despite Lisbon making good progress on the reforms attached to its bailout programme.

'It is wise for the EU to be prepared that some kind of a bridge needs to be built once Portugal returns to the markets,' EU Economy Commissioner Olli Rehn told the Finnish broadcaster MTV3.

But he dismissed suggestions that Portugal might follow into Greece's footsteps in needing a partial debt write-off.

'Portugal is not the same as Greece, in many ways. EU leaders are strongly committed to Greece remaining an exception, and the only country where debt restructuring is done,' the commissioner insisted.

Authorities in Lisbon are currently raising money through so-called Treasury bills.

Under current EU and International Monetary Fund (IMF) plans, Portugal is expected to return to regular government bond issuances in September 2013, provided it can sell them to investors at reasonable interest rates.

On Tuesday, an EU commission official raised the possibility of pushing back that date to give Portugal more breathing space.

'Postpone to some extent these debt redemptions, to make a swap: this, in technical terms, can of course be conceived for Portugal, but is not under discussion now,' Peter Weiss, a member of the EU-IMF Portuguese bailout team, said in Brussels.

Portugal turned to EU-IMF loans after yields on its 10-year bonds breached the 7-per-cent mark, making market borrowing too expensive. The rate is now about 12 per cent, after peaking at over 17 per cent in January.

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