In a single issuance, Portugal has assured more than one fifth of the financing for 2018

  • ECO News
  • 11 January 2018

IGCP was able to get 4,000 million euros in Bonds with the lowest rate of the decade. Mário Centeno highlighted that investors' appetite would allow the State to meet its needs for 2018.

In just one go, Portugal assured enough money to cover one fifth of the Republic’s financing needs for 2018. This Wednesday, IGCP (Portuguese Debt Management Agency) placed 4,000 million euros in ten-year Treasury Bonds with the help of a banking syndicate. Investors’ appetite for Portuguese debt was so voracious that the financing cost was the lowest ever.

Portugal went to the market with a new line of ten-year bonds by making a 4,000 million euros issuance. The amount corresponds to 21.6% of the total amount IGCP hoped to raise throughout the year, assuming the Government will comply with its share when it comes to the deficit for this year, estimated to stand at 5.5 billion euros.

All in all, the debt management agency hopes to receive 18.5 billion euros from the market in 2018. A large portion of that goal has been achieved in the first issuance of the year, with a better than ever interest rate, which highlights this accomplishment even more.

IGCP disclosed, in the announcement of the results of the issuance, that the cost of the debt was 2.137%, highlighting the decisive contribution of the rating improvements from Standard&Poor’s and Fitch. One year ago, when the last syndication took place, the interest rate charged to investors was higher than 4%, twice the amount registered in this operation.

The Finance minister himself was impressed by the voracious appetite investors showed for the country’s debt (a sign of confidence about Portugal), which allowed the risk premium to fall. The operation closed at 114 basis points in the end of the operation, after having sent purchasing orders surpassing 17 billion euros, four times more than what was actually “sold”.

Therefore, Portugal enters 2018 just as it ended 2017: decreasing the cost of its debt. Last year, new debt was issued with an average interest rate of 2.6%, allowing a reduction of the total cost of the debt from 3.2% to 3%, the lowest of the decade.

With this syndication, the Portuguese Treasury was able to guarantee a double goal: satisfying its financing needs at a low cost and a larger amount, and having a more diverse base of investors. IGCP clarified that around 80% of bonds were purchased by banks and fund managers.