DBRS gives Portuguese interests a helping hand. Ten-year rate is close to 2%

  • ECO News
  • 6 November 2017

Ten-year interests stand at a new minimum in over two years after DBRS maintained Portugal's outlook and rating. The interest rate is closer to leaving the 2% psychological threshold.

Last Friday, unlike what was expected, DBRS left Portugal’s stable outlook and “BBB low” rating untouched. Nonetheless, this was enough to cause a new decrease in the ten-year bonds’ interest rate to a new minimum since April of 2015, more than two years ago.

The interest associated with the debt maturing in one decade falls more than four basis points to 2.028%. It is almost falling below the 2% psychological threshold again — the last time it transacted below this threshold was in April of 2015.

"A favorable public debt profile and a sound current account position, in part supported by improved trade competitiveness, also support the rating.”

DBRS

The market’s optimism lead some investors to believe DBRS, who has been a friend of Portugal’s for the past few years, would increase the country’s rating last Friday, placing it two steps above what is considered a “speculative investment”. That scenario ended up not happening, but the Canadian agency still commended Portugal’s performance in 2017 — although it left some warnings, as usual.

Portugal presents a “favorable public debt profile and a sound current account position, in part supported by improved trade competitiveness” of the country, DBRS justified. Yet, the “significant challenges” Portugal faces, including “elevated levels of public sector debt, low growth potential, high non-performing loans (NPLs) and corporate sector debt” lead the agency to maintain the country’s rating and outlook. DBRS also pointed to “potential public spending pressures” as a challenge faced by Portugal.

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