Portuguese bonds will only get to China next year

  • ECO News
  • 21 December 2017

Portugal continues working towards the first debt issuance in Chinese currency, but deadlines will be missed. The first panda bonds issuance in an Euro area country will only happen in 2018.

The first Chinese currency debt issuance of an Euro area country will be postponed to 2018, with the Portuguese Government maintaining the renmimbis financing operation of around 380 million euros, but only next year, ECO ascertained with an official source from the Finance Ministry.

The debt securities issuance denominated in yuans remains on the table and the Portuguese authorities continue to work towards the so called panda bonds, which is the name given to bonds issued in Chinese currency. Except that will not happen this year, as was foreseen. A source from the Government disclosed that a precise date for the beginning of the issuance has not been set: “It will depend on the market conditions”, that same source stated.

The Government has been in contact with the Chinese authorities since May in order to issue debt in the Chinese market which is worth 9.5 billion dollars, and the first sovereign Euro Area operation in the country is being considered. In September, China’s central bank gave Portugal permission to move forward with a debt issuance with the help of a union of banks which includes CGD, HSBC and the Bank of China.

As it had been announced at the time, the operation will be made by means of a tender offer in the interbank market. The Portuguese panda bonds will have a five-year maturity.

However, since the green light was given by Beijing to perform the operation, the agenda of the Finance Ministry made it more difficult to develop this portfolio. September, October and November were filled with 2018 State Budget-related works, which took all of the staff’s time and availability. After that, in the beginning of December, the Finance minister (and the Government) devoted a lot of time to Centeno’s victorious run for the presidency of the Eurogroup.

Anyways, in spite of the delay, the operation stands and Portugal will get to the Chinese debt market in a good momentum. The Portuguese debt interests in euros continue renewing minimums in several maturities after Fitch improved Portugal’s rating, removing it from the “junk” status. This two-level improvement allowed the Portuguese debt seem more appetizing to investors who prefer playing it safe.