Treasury assured another three billion through a syndicated issuance. The result of the operation reveals investors' "tremendous appetite". Portugal has already raised 9.5 billion with this issuance.
Portugal has already assured more than half of its financing needs for 2018 with long term debt, after having raised, this Wednesday, another three billion euros from the second syndication of this year.
IGCP, the Portuguese Debt Management Agency, hopes to get 15 billion euros just from Treasury bonds issuances throughout 2018. In a press release, assessing the operation, IGCP states that with this issuance, “Portugal has completed around 2/3 of the financing plan” foreseen for this year.
The truth is that after this Wednesday, over 60% of that long term financing has been assured, and not even four fulls months have gone by since the beginning of the year: 6.5 billion euros have already been raised in the first quarter, and with this syndicated issuance, the amount rises to 9.5 billion euros. For this operation, this Wednesday, IGCP paid an interest rate of 2.325% to place bonds maturing in 2034.
This Wednesday’s operation sparked a “tremendous appetite” in investors, which justifies the increase in the amount that was issued. The initial goal of the entity headed by Cristina Casalinho was to place 2.5 billion euros, an amount that increased to the 3 billion euros that ended up being raised.
IGCP stated this new line of 15-year Treasury bonds gives the market a new reference point in Portugal’s curve, which fills the gap between Treasury bonds maturing in February 15 of 2030 and those maturing in April 15 of 2037. “This is the first reference of Treasury bonds launched with this maturity since 2014”, the entity headed by Cristina Casalinho states.
In terms of the profile of investors that took part in this operation, 30.7% was in the hands of investment funds and banks held 25.2%, followed by insurance companies and pension funds, with 22.3% of the total financing made available.
Apparently, Portugal is accelerating the rhythm of its issuances in the beginning of the year. And there are more than enough reasons for that, according to the head analyst of Danske Bank, Jens Peter Sørensen. “Part of the explanation has a lot to do with the 6.6 billion euros’ reimbursement Portugal will have to make in June. But there are also a lot of amortizations happening in April and May, so there is an excess cash to be reinvested”, the specialist told ECO.
Part of the explanation has a lot to do with the 6.6 billion euros’ reimbursement Portugal will have to make in June. But there are also a lot of amortizations happening in April and May, so there is an excess cash to be reinvested.
In fact, the Finance Ministry had told ECO that it was reinforcing its financial buffer in order to face up to the large return the Portuguese Treasury will have to make to the market on June 15. “There will be a proportional increase in deposits, which will be reversed in June, by amortizing the Treasury bonds’ line maturing that month an whose balance ascends to 6.6 billion euros”, the Finance Ministry underlined, one week ago. The same is to say that Portugal continues filling its safes to pay that paycheck in June.
But Sørensen sees more interest for Portugal to finance itself by means of banking syndications. “A larger number of issuances mean the European Central Bank is able to purchase more Portuguese debt”, the specialist underlines. And why make an issuance with a 15 year maturity?
“The 15-year segment has been neglected by Governments. Core issuers’ issuances have been limited in this segment. Therefore, these new issuances are more attractive to issuers than high coupons for older bonds”, he states. “On the other hand, these bonds provide more financing flexibility and smooth the country’s reimbursement profile”, Danske Bank’s analyst adds.