By Emese Bartha
Portugal and Ireland, countries that have weaned themselves off
international financial aid, are making new forays into capital
markets this week.
Portugal is launching a new 10-year U.S. dollar-denominated
government bond via a syndicate of banks Wednesday, in a fresh sign
of smooth and steady market access following its recent exit from a
three-year bailout program.
The total order book was in excess of $10 billion for the
October 2024-dated bond, whose initial price guidance of 265 basis
points above Treasurys was tightened to 260 basis points above
Treasurys, one of the lead managers said, implying a yield of
around 5.20%. The transaction was lead managed by Barclays, Danske
Bank, HSBC and Société Générale CIB.
This dollar issuance was expected by markets after Joao Moreira
Rato, president of Portugal's debt agency IGCP, told The Wall
Street Journal last week that the country was considering selling
dollar-denominated bonds for the first time in four years. Mr. Rato
said the issuance in dollars was aimed at diversifying Portugal's
investor base.
Portugal exited its EUR78 billion ($106.8 billion) three-year
bailout in May without asking for a precautionary credit line, and
ratings firms have praised the country's achievements in fiscal
consolidation. On May 9, Moody's Investors Service raised
Portugal's rating to Ba2, or two levels into junk, from three
levels, citing improved economic and market conditions. On the same
day, Standard & Poor's Ratings Services' revised Portugal's
outlook to stable from negative, and kept the country's rating at
BB, also two levels into junk.
Portuguese government bonds are in demand as investors are
attracted by their relatively high yields in the current record low
interest rate environment in the euro zone.
Ireland, which left its EUR67.5 billion bailout in December last
year, meanwhile, is today buying back a government bond maturing in
2016, and is also exchanging a 2023-dated bond for two 2016-dated
bonds. These parallel operations not only aim to reduce the
country's debt repayment duties in 2016 but also seek to increase
the average maturity of the country's debt.
In the buyback operation, the Irish National Treasury Management
Agency set a buyback price of 107.77 for the bond, implying a yield
of 0.165%, it said. At the time of the announcement, the 2016-dated
Irish bond was trading at a midmarket yield of around 0.15%,
according to Tradeweb data.
Portuguese and Irish government bonds are in demand as investors
are attracted by their relatively high yields in the current
low-interest-rate environment in the euro zone.
Portugal's 10-year euro-denominated bond yield is currently
trading at around 3.58%, compared with levels around 6% at the
beginning of the year. Irish 10-year bonds are trading at 2.36%,
down from around 3.42% at the beginning of the year. By comparison,
10-year German Bunds, Europe's benchmark, are trading at around
1.25%.
Write to Emese Bartha at emese.bartha@wsj.com