PORTUGAL managed to sell off €1bn (£850m) worth of debt at a short-dated bond auction yesterday, with one-year yields rising to 4.06 per cent from 3.99 per cent for similarly dated bonds at its last sale.
But with the scale of European Central Bank (ECB) intervention unclear, markets are still waiting to see a comprehensive solution from Eurozone governments, adopting a wait-and-see approach.
The ministry of finance said more than half of the debt was bought by institutional investors. The sale consisted of €550m worth of six-month debt, sold at an average yield of 2.98 per cent, and €450m of 12-month debt.
Lisbon had been due to go to the market at a debt auction last month but postponed the sale following its last attempt to sell long-dated debt, which forced the ECB?to wade in to the market to buy up bonds equal in value to a quarter of the bonds on offer. Analysts at Barclays Capital have estimated that the ECB bought €19.5bn worth of Portuguese debt last year, versus issuance of €21.7bn (see chart below).
Capital Economics analysts said: “The apparent impasse between the ECB and Germany over the purchase of peripheral government bonds not only makes it very likely that Portugal will have to accept a bailout but also questions the policymakers’ ability to prevent the debt crisis from continuing to escalate.