Portugal buys breathing space with bond swap

Portugal returned to bond markets yesterday for the first time since a bailout last year, swapping short for longer-dated debt to buy time to fix its public finances.

The swap will make Portugal’s debt repayments easier next year, giving it time to make the savings necessary for reducing debt and get the economy growing again so it can avoid a Greek-style debt restructuring.

The IGCP debt agency sold €3.76 billion of October 2015 bonds, exchanging them for debt maturing in September 2013 bonds. The swap to extend the maturity of the country’s debt follows similar operations by fellow bailout recipient Ireland.

The head of the IGCP debt agency, Joao Moreira Rato, said “this marks a first step for Portugal to regain access to medium- and long-term debt markets.”

Under Portugal’s €78 billion bailout from the European Union and IMF, the country was envisaged to only return to finance itself in bond markets in the second half of 2013.

Buying up the September 2013 bond before it matures, will help the country’s financing needs next year. The amount it swapped represented 39 per cent of the outstanding amount of the September maturity – the first not fully covered by the bailout.