Portugal pays more to issue 8-year debt

  • ECO News
  • 11 May 2022

At a time when interest rates are rising, the IGCP went to the markets this Wednesday to issue new debt.

The agency that manages the Portuguese public debt issued €750 million in 8-year bonds at an interest rate of 1.767%, up from the 1.008% registered in February’s 9-year debt auction, according to data published on Wednesday by Reuters.

Despite the rise in interest, demand for Portuguese debt increased compared to that February auction, with offers from investors exceeding IGCP’s offer by 1.86 times, compared to 1.27 times in February.

There is no recent 8-year debt issuance that is comparable to this one, hence the comparison with the 9-year debt. On February 9, Portugal obtained €706 million in Treasury Bonds maturing in October 2031 (nine years), for which it paid an interest of 1.008%.

This is the result of inflation in the Eurozone accelerating to historical highs and the expected normalisation of monetary policy in the coming months, with the end of the asset purchase programme and the possible start of interest rate hikes in July or September.

The agency that manages Portugal’s public debt was able to raise the maximum amount of €750 million, as announced. Last week, IGCP announced it would hold an auction this Wednesday to issue Treasury Bonds (T-Bonds) maturiting in 2030, with an indicative amount between €500 and €750 million.

In secondary markets, the yield on the Portuguese 8-year debt is trading at 1.8%, but last Friday it reached 2%, a 5-year high.