Ailing Portugal raises $1.71 billion in bond sales

AP News
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Posted: Sep 21, 2011 9:03 AM
Ailing Portugal raises $1.71 billion in bond sales

Portugal raised euro1.25 billion ($1.71 billion) in two short-term debt auctions Wednesday with interest rates reflecting simmering market unease over the eurozone sovereign debt crisis.

Portugal needed a euro78 billion ($105 billion) bailout this year to help pay its debts as it battles to emerge from recession. The country went into a double-dip recession this year and the economy is forecast to keep contracting through 2012. The jobless rate is 12.3 percent, above the European Union average of 9.4 percent.

The state debt agency said it sold euro1 billion ($1.37 billion) in 3-month bills at a rate of 4.93 percent, down slightly from 4.96 percent in the last such auction Sept. 7.

It also sold euro250 million ($342.75 million) in 6-month bills but had to pay a yield of 5.25 percent, up sharply from the 4.98 percent paid in the last sale.

Demand for shorter-term bills was 1.7 times higher than the amount offered and 4.5 times higher for the longer loan. Analysts said the sale went better than expected.

"Good news for the Portuguese Republic. I wasn't expecting these yields," said Filipe Silva, Head of Debt Trading at Banco Carregosa.

"A kind conclusion we may take is that investors do believe government will achieve the expected results with the austerity measures," he added.

The auctions were the first to be held since the news last Friday that Portugal's Madeira Islands failed to report more than euro1 billion ($1.37 billion) in debts, a major setback for the country's efforts to reduce its high debt load.

The Madeira Islands off northwest Africa elect their own regional authorities, but receive funding from the central government in Lisbon and the European Union. The islands have been governed by the same man since 1978, Alberto Joao Jardim, a populist who has invested heavily in public works and is trying to get re-elected next month.