The Portuguese Government opens the door to very long term debt issuance

  • ECO News
  • 29 January 2018

The secretary of State assistant, Ricardo Mourinho Félix, discloses that Portugal may soon seek financing through a bond issuance maturing in 20 or 30 years.

Portugal is preparing a very long term debt issuance, in addition to the usual ten-year maturity, according to the State Secretary for Finance Ricardo Mourinho Félix. On the table may be a 20 or 30-year bond issuance.

“We have conveyed to IGCP that we’re open to looking at possibilities of long-term issuance of bonds if it’s profitable, adequate, and stable enough to be part of our yield curve”, Mourinho Félix said, in statements disclosed this Monday by Reuters.

And he then specified: “We can look at concrete proposals that investors may have, but [20 to 30-years] are the type of maturities that other countries that are very long [have issued and] that’s the type we can look at”.

In the last issuance (the first and only long-term issuance of the year), the Portuguese treasury got four billion euros in ten-year bonds, with the interest rate decreasing to 2.14% — well below the 4.23% paid in a similar operation, one year ago. But now, it is able to use more favorable conditions and go further.

Moreover, Italy’s success in the nine billion euros’ issuance on 20 years securities might show the path Portugal could follow. Orders for Italian bonds reached 31 billion euros, signaling a strong interest from the market in purchasing non-core European bonds.

A banker told Reuters that “there’s a very high chance of good performance in bond markets if Portugal continues to deliver on the data front”.

Moving forward with a long-term debt issuance would be the next step after Portugal repaid the most expensive tranche of the International Monetary Fund loan. Last week, the country returned a little over 800 million euros and got rid of the spread penalty.

On this subject, the Portuguese governor highlighted that Portugal had “a very prudent debt management strategy, replacing official investment by market investment without cutting down the average maturity of our debt”.

According to IGCP, the Portuguese State’s net financing needs for 2018 stand at around 10.9 billion euros.