* Issuance authorisation comes after successful short debt
sale
* Newspaper says 5-year bond issue being readied
* Analysts see good chance of market return in a few months
By Andrei Khalip
LISBON, Jan 17 (Reuters) – Bailed-out Portugal has
authorised the country’s debt agency to tap into improving
market sentiment by issuing bonds and bills with an eye to a
full return to markets “as soon as possible”.
Government spokesman Luis Marques Guedes said on Thursday
there was no set schedule or amounts for any debt issues yet.
“(But) it means Portugal can go to the markets at any
moment,” he said.
He would neither confirm nor deny a report in the Diario
Economico newspaper that Portugal is preparing to issue a 5-year
syndicated bond in the next few days.
“The government is doing everything … to regain investor
confidence for Portugal to return to the markets as soon as
possible,” Guedes said, adding that favourable results of
short-term debt auctions have contributed to these efforts.
On Wednesday, Portugal sold 2.5 billion euros of 3-, 12- and
18-month treasury bills at much lower yields than at previous
auctions, a sale that Prime Minister Pedro Passos Coelho deemed
“fantastic”.
Despite the worst recession since the 1970s, investors are
increasingly confident that Portugal will be able to return to
the long-term bond market before September, when the country’s
debt needs are no longer covered by its EU/IMF bailout.
Speaking in Paris, the prime minister said the country
needed to “go further in its strategy to return to the markets”
and “will seek to issue long-term debt and obtain the necessary
help from our partners to do so”.
The International Monetary Fund approved on Wednesday
disbursement of the next loan tranche to Portugal.
Portuguese benchmark 10-year bond yields dropped to 6.23
percent from Wednesday’s settlement level of 6.32 percent. The
yield is around its lowest levels since late 2010, before the
78-billion euro bailout agreed in May 2011.
The IGCP debt agency chief Joao Moreira Rato was in the
United States on Thursday for a roadshow with investors to
explain Portugal’s debt strategy.
Diario Economico wrote that the final decision on the
issuance of the syndicated bond would still depend on the
success of the ongoing road show, next Monday’s Eurogroup
meeting and still-to-be-announced data on how the budget ended
last year.
BOND ISSUE CAN WAIT
Although optimistic about Portugal regaining access to
market funding this year, analysts were cautious about the
possibility of a bond issue in the coming days or weeks.
“Sure it’s a step forward in regaining access, they want to
get everything in place and the IGCP can now go shooting when it
deems that most boxes are ticked,” said David Schnautz, debt
strategist at Commerzbank in New York.
But he said he was taken by surprise by the bond issue
report as the IGCP had only last week said the chances of real
supply were still remote.
“They have until September and are in no real rush. Another
exchange of bonds is definitely on the cards, but we expect
issuance to begin at the end of the summer, maybe with two or
three auctions before the end of the year … We expect any
Irish-style supply only from September,” he added.
Ireland began to pave the road towards exiting its EU/IMF
bailout last year, when it took advantage of a sharp fall in
bond yields by launching two bond swaps, a maiden amortising
bond issue and new long-term debt sales.
In October, Portugal also carried out a bond swap,
exchanging debt expiring this year for a 2015 maturity.
The European Central Bank has calmed investors about debt
from euro zone countries such as Portugal, saying it will, if
necessary, step in and buy bonds from a country seeking a
bailout.
Along with Portugal, Ireland, Spain and Italy have all been
recent beneficiaries of the improved sentiment.
