PORTUGAL saw borrowing costs soar at its first debt auction of the year yesterday, with yields on the sale of six-month notes reaching a new record of 3.7 per cent – up by an eye-watering 170 basis points since its last six-month bond auction in September.
However, at these rates, demand was higher than previously, with all €500m’s (£430m) worth of notes on offer sold.
The Portuguese auction came on the same day as Germany also held a successful sale of €3.9bn’s worth of 10-year bonds, helped by a dip in equity prices that sent investors into bond markets after yesterday’s shares rally.
The auctions yesterday followed sales by the Netherlands, Belgium and Hungary on Tuesday, with costs on their short-term debt falling overall.
But there are further tests to come, with analysts particularly watching demand at longer-dated auctions.
Barclays Capital estimates that the Eurozone will need to finance €175bn’s worth of debt in just the next two months, making for a year total issuance of €842bn in bonds. That would be slightly down from last year’s total sales of €911bn.