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 offered a $4 billion, 10-year U.S. dollar-denominated
bond via a syndicate of banks Wednesday, in a new sign of smooth
and steady market access, following its recent exit from a
three-year bailout program.
This has been the largest U.S. dollar benchmark from a sovereign
in the 10-years' segment, and also the largest U.S. dollar
sovereign benchmark since Germany's $5 billion issue in 2005, the
lead managers said. The Portuguese bond was priced at 99.221 to
yield 5.225%, they added.
The total order book exceeded $10 billion for the October
2024-dated bond. The initial price guidance of 2.65 percentage
points above Treasurys was tightened to 2.60 percentage points, one
of the lead managers said. The lead managers on the transaction
were Barclays PLC, Danske Bank AS, HSBC Holdings PLC and Société
Générale CIB.
Joao Moreira Rato, president of Portugal's debt agency, IGCP,
said in an interview 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 ($106.7 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 Inc. 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.
Ireland, meanwhile, which left its EUR67.5 billion bailout last
December, reduced the amount of redemptions it will have to pay
back to investors in 2016 by slightly more than EUR2 billion
through two operations--an outright buyback of its 4.60% April 2016
bond, and an exchange of the same 2016-dated bond for the 3.90%
2023 bond. The exchange operation was done on a 2-for-1 nominal
basis--one 2023-dated bond sold for two 2016-dated bonds bought
back.
As a result of the moves, EUR2.037 billion of the 2016-dated
bond has been canceled, which in turn reduces its amount
outstanding to EUR8.132 billion from EUR10.169 billion, Ireland's
National Treasury Management Agency said.
Portuguese and Irish government bonds are in demand as investors
are attracted by their relatively high yields compared with the
euro zone's record-low interest rates.
Portugal's 10-year euro-denominated bond yield is trading at
around 3.62%, compared with yields of around 6% at the beginning of
the year. Irish 10-year bonds are trading at a 2.40% yield, down
from around 3.42% at the beginning of the year. By comparison,
10-year German Bunds, Europe's benchmark, are trading at a yield of
around 1.29%.
Write to Emese Bartha at emese.bartha@wsj.com