Can Portugal go it alone?

Portugal’s Treasury is to place the first significant issue of long-term bonds since the departure of the 'Troika.'

Ten-year bonds will be on offer on Wednesday in order to raise a total of €750 million for the government to spend.

This bond issue represents the first substantial test for the government since it left the bailout programme cleanly, claiming it needs no financial underpinning.

In the last such bond operation, launched on 23 April before the Troika left town in early May, the IGCP (Agência de Gestão da Tesouraria e da Dívida Pública) which manages Portugal’s public debt, placed €750 million in ten year bonds at the lowest interest rates since 2005, amid jubilation from the ruling coalition.

Interest rates on Portugal's two-year and ten-year bonds fell last week to reach all time lows in the secondary market and firm direction from the European Central Bank has paved the way for a good sale of bonds ths coming week.

The Troika still is deeply involved in Portugal’s economy - its three institutional members being the country’s largest lenders – and is holding on to €3.5 billion final payment payable under the terms of the original bailout. This is due to the rejection by the Constitutional Court of three out of four key cost saving measures in Prime Minister Pedro Passos Coelho’s 2014 Budget which has left an embarassing funding gap of around €600 million.

Another plus point for Wednesday’s bond sale is the improvement in ratings from the major agencies, although this is from 'junk' to the status of a ‘speculative investment.’

You must be a registered user to make comments.
Please register here to post your comments.