Portugal issued a new 10-year bond this week maturing in February 2024 and investors have submitted bids well over the 3 billion euros being sold. The sale was syndicated, i.e., was arranged by a syndicate of banks who contacted potential investors and organise the auction. Portugal last auctioned 10-year bonds in January 2011 at a yield of 6.716 percent. This sale is the second bond-auction after the country raised 3.5 billion euros through five-year bonds in February 2013. According to the Finance Minister, this operation will start pre-financing for 2014, therefore allowing for a smooth exit from the financial assistance programme.
While this week’s news suggest that the markets are rather confident that Portuguese debt is sustainable and that the Government is doing everything in its power to reduce the deficit in a sustainable way, investors remain concerned about growth prospects for Portugal. The Government’s more recent plan to promote growth still lacks details and does not address the more structural question of how Portugal can become more competitive.