Portugal pays 2.8% interest for debt maturing in 27 years

Portugal raised 1,250 million euros in ten and 27-year debt. In both maturities, it paid the lowest interests ever. Bonds maturing in 2045 — the longest maturity the Portuguese Republic uses to obtain financing –, IGCP was able to get 2.8% interests, in light of a larger interest from investors.

As expected, IGCP returned this Wednesday to the debt market to have a double auction that marked Portugal’s return to the very long term financing. And it was successful, since it registered much lower interest rates than previous auctions — which means these loans were less expensive to the Portuguese Treasury.

Investors demanded an interest rate of 2.8% to purchase 275 million euros in debt securities maturing in 2045 (27 years). This cost is in line with the prices charged in the market, but is a steep decrease in comparison to the previous operation in the same line: less than a year ago, when it resorted to this 2045 line, it registered a 3.977% rate. The size of the operation was key in this reduction: IGCP placed less debt in comparison to previous auctions, which helped improve the supply and demand ratio.

2045 line continues registering minimum rates

In addition, on the ten-year reference line, Portugal was also able to take advantage of the good conditions in the market to finance itself at the smallest costs ever recorded. It registered an 1.778% interest rate to sell 975 million euros — one month ago, for the same maturity, the interest rate was 2.046%.

According to IGCP’s forecasts, the average cost of the Portuguese public debt should continue decreasing due to the early repayments to the International Monetary Fund (IMF), but also because of cheaper issuances: in 2018, the indebtedness stock cost will fall to 2.8%, the lowest of the decade.