Portugal seeks to cut debt burden

Published Dec 2, 2013

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Lisbon - Portugal plans to carry out a bond exchange tomorrow to reduce debt repayments due in the next two years as it approaches the end of its 78 billion-euro ($105.6 billion) international bailout.

Debt agency IGCP will buy bonds maturing in June 2014, October 2014 and October 2015, it said today in an e-mailed statement.

At the same time, the agency will sell 4.677 percent securities due in October 2017 and 4.956 percent notes maturing in June 2018.

Portugal’s government is trying to regain full access to debt markets with the end of its rescue from the European Union and International Monetary Fund approaching in June.

The 2014 notes have 13.6 billion euros outstanding and the 2015 bond has 13.4 billion euros outstanding, according IGCP’s website.

“We saw a good opportunity” to tap the market, Finance Minister Maria Luis Albuquerque told reporters in Lisbon today, in comments broadcast by SIC Noticias television station.

“It’s an absolutely normal debt-management operation.”

The country’s two-year note yield dropped nine basis points, or 0.09 percentage point, to 3.31 percent at 1:28 p.m. London time.

The 10-year bond yield increased five basis points to 5.91 percent.

It dropped to 5.19 percent on May 21, this year’s low, and the least since August 2010.

Portugal pays an interest rate of 3.2 percent on its bailout loans and its debt is ranked below investment grade by Fitch Ratings, Moody’s Investors Service and Standard & Poor’s.

The country’s net financing needs in 2014 will be 11.7 billion euros, Secretary of State for Treasury Isabel Castelo Branco said on October 15.

The government plans gross bond issuance of 10.5 billion euros in 2014, when financing from the EU, IMF and European Central Bank troika will be 7.9 billion euros, she said. - Bloomberg News

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