Portugal pays more to issue 1,100 million in debt

  • ECO News
  • 9 March 2017

The Portuguese Republic has financed itself this Wednesday with over 1,000 million euros, although financing costs have considerably increased.

This Wednesday, the Portuguese Treasury raised 1,112 million euros in long-term debt, but paid more for it. In the nine-year maturities auction, the financing cost worsened in over 100 basis points, reflecting the instability surrounding Portugal in the past weeks.

Two lines of treasury bonds were auctioned. And in the financing operation through securities maturing in 2026, the IGCP (Portuguese Treasury and Debt Management Agency), paid a 3.95% interest rate for a debt of 612 million euros. This represents a worsening of 100 basis points in comparison with the last similar auction: in June, 2016, 400 million euros were sold with an average interest of 2.859%.

In the auction for bonds maturing in 2020, the Portuguese Treasury paid 1.261% interests to raise a total of 500 million euros, in a line with a solid demand: expressions of interest for these securities surpassed the demand 2.7 times.

The 1,112 million euros achieved in the two auctions complied with the goal set by IGCP — an indicative global range amount of 1,000 million to 1,250 million euros.

The operation increased to 5,292 million euros the total amount of financing with the sale of Treasury bonds since the beginning of 2017, which corresponds to more than one third of the overall amount predicted for this year — between 14 billion and 16 billion euros.

Even so, Portugal has encountered difficult circumstances going to the first primary financing markets of 2017. Several factors contributed to the interests rise in the secondary market, namely the increase in inflation, doubts concerning the impact of ECB’s purchase programme and also specific risks related to the country, namely the fragile banking system.

Ten-year interests surpass 4% in the secondary market

Source: Bloomberg (percentage values)