Interest on Portuguese debt has been rising in the secondary market due to fears over the impact of coronavirus. In the primary market, financing costs followed the same trend.
Portugal obtained higher interest rates to issue, this Wednesday, short-term public debt and did not reach the indicative total for the auction. The Treasury and Public Debt Management Agency – IGCP placed one billion euros in six and 12-month Treasury Bills (T-Bills) at a time of high volatility in the financial markets due to the outbreak of coronavirus.
In the case of the longer term, 12-month T-Bills, the IGCP placed 405 million in securities, with an interest rate of -0.101%. Despite continuing to be negative, this rate represents a strong increase from -0.482% in the last auction with the same maturity, held on January 15.
at 6-months T-Bills, the Treasury issued 595 million with an interest rate of -0.089%. In the last comparable auction, also in January, this rate had stood at -0.487%.
The circumstances are, however, different now than they were then. The coronavirus pandemic has led investors to move away from debts seen as more risky, to the detriment of shelters while falls in stock markets have limited liquidity in the markets. In recent days, the yield on Portuguese Treasury bonds has reflected exactly this scenario, rising to more than 1.5%, which had not happened since February of last year.
In this scenario, the demand for T-Bills in Wednesday’s auction sank, leading to the agency led by Cristina Casalinho issuing only one billion euros, while the indicative amount was between 1,250 and 1,500 million. In 12-month T-Bills, demand was 1.26 times higher than supply (compared to 1.78 times in January), while in six-month tickets it was 1.13 times higher (compared to 2.24 times at the last auction).