LISBON, Portugal – Bailed-out Portugal took a big step toward gaining full access to credit markets by raising 3 billion euros ($4 billion) from a sale of 10-year bonds Tuesday.
The bonds are considered a benchmark of market faith, and Portugal’s ability to tap investors for cash over a long-term horizon is a sign that confidence in the country’s economic future is returning.
Portugal, one of 18 European Union countries using the euro currency, needed a 78-billion-euro rescue in 2011 to avoid bankruptcy as jittery investors refrained from lending it money. The bailout money runs out in June, and the government wants to re-establish market access before then.
The 10-year bond sale was the first of its kind since the bailout — Portugal has raised money through shorter-dated offerings over the past few years. The government debt agency said it paid an affordable interest rate of 5.11 per cent, with demand exceeding threefold the amount on offer. When Portugal was effectively locked out of bond markets, investors were pricing in rates above 7 per cent or so.
Portugal isn’t the only bailed-out eurozone country that is appears to be throwing off the shackles. Ireland exited its bailout program at the end of last year as the financial gloom over debt-heavy Europe has gradually lifted. Cash-rich investors, meanwhile, are looking for opportunities for healthy returns.
“The recent fall in interest rates and risk perception (on Portuguese debt) brought an opening that the government has used to its advantage,” said Filipe Silva, debt manager of Lisbon-based financial group Banco Carregosa. “On the other hand, investors were drawn by the very attractive profits to be made.”