The sale has been branded a success and lifts some pressure off the country to seek a bailout from the EU and IMF.
Portuguese finance minister Fernando Teixeira dos Santos said foreign investors had snapped up 80 per cent of the placement, which he said would help Lisbon resist following Ireland and Greece in seeking international aid.
The government sold €1.249bn (£1.04bn) in two bond maturities – at the very top end of the initially indicated €1.25bn offer – in its first bond sale of the year.
"We consider today's bond auction a success," Teixeira dos Santos said. "We see no reason to abandon the strategy of raising financing in markets and diversifying our investor base."
Analysts welcomed the result as better than expected. Michael Hewson, market analyst at CMC Markets, said yields came in much below the key seven per cent level that precipitated bailouts for Greece and Ireland.
Traders said the move had calmed nerves in the markets, with both the Spanish Ibex and Italian Mib blue-chip stock indices posting gains of more than three per cent.
“European markets can breathe a little easier this afternoon,” said Ben Critchley, sales trader at IG Index. “A Portuguese bail-out has been considered something of an inevitability for some time, but today’s strong showing may ease such fears for now.”
“This can be seen as an important confidence boost from investors that their sovereign debt fears could be waning,” said Joshua Raymond, a market strategist at City Index.
“All eyes will now be on Spain’s bond auction tomorrow to see if they can create a similarly confident stock market response.”