Portugal raises fresh funds

Debt-stressed Portugal yesterday raised €1.645 billion in one-year bonds, paying a high rate of interest but still much less than expected, to raise the funds.

The national debt agency said the average yield – the rate of return paid to buyers of the bonds – was 5.793 per cent, well below analyst forecasts for rates of around 6.4 per cent.

The auction was 1.4 times oversubscribed, the debt agency said.

At its last bond sale, Portugal paid a rate of 5.905 per cent on €1 billion in bonds maturing in September 2013.

Such rates on short-term bonds are considered very high and reflect market concerns that Portugal will likely need external help to overcome its debt and deficit problems.

Rates on benchmark Portuguese 10-year bonds have jumped above eight per cent – an unsustainable level for the long-term – since Parliament voted down the government’s latest austerity package, forcing the government’s resignation last week.

Figures Thursday showed Portugal missed its 7.3 per cent deficit target for last year, coming in at 8.6 per cent of Gross Domestic Product, way above the EU limit of three per cent.

Since the political crisis broke, Portugal has been under growing pressure from the financial markets and the ratings agencies, worried about the solvency of the country.

Although the cost of borrowing has risen, outgoing Prime Minister Jose Socrates has repeatedly ruled out seeking external aid, as Greece and Ireland were forced to do last year.

The caretaker government, however, does not have the right to negotiate an international bailout for the country’s ailing economy, Finance Minister Fernando Teixeira dos Santos said Thursday.