Portugal sells €1bn in bonds

PORTUGAL edged closer to an EU bailout as its two-year cost of borrowing on a €1bn (£861m) bond sale surged yesterday.

The Portuguese government sold the 5.45 per cent bond, which matures in 2013, at a yield of 5.993 per cent. The cost was almost 200 basis points higher than the 4.086 per cent yield from its last sale of two-year bonds in September.

The heavily-indebted nation, which has €4.3bn of bonds due for repayment in April, denied that it would need to seek EU support.

“These are rates that are not sustainable in the longer term, but they are still bearable at the moment,” Portuguese Treasury secretary Carlos Pina said. Portugal “does not need external help”, he said. Bids for the bond exceeded supply by 1.6 times, down from 1.9 on September’s issue.

But Evolution Securities analyst Elisabeth Afseth said most people considered a bailout “a done deal”.

“It has not been agreed by politicians but as far as the market is concerned it is widely expected that it will emerge at some point,” she said.

CMC Markets analyst Michael Hewson said Portugal’s ten-year borrowing cost was 7.7 per cent, which he described as “not sustainable”.

higher than the level at which Greece and Ireland had sought bailouts.

“This is not sustainable,” he said,

Portugal also held a reverse auction to buy back bonds maturing in April and June yesterday, repurchasing €14m worth of the June issue.