PORTUGAL SOLD €1 billion in treasury bills yesterday, with yields stable and demand solid as the debt-laden country managed to avoid another sharp rise in borrowing costs. But fears it will need a bailout remained.
The IGCP debt agency sold all its planned issuance at the auction, with the yield on 12-month treasury bills creeping only slightly higher to 4.057 per cent from 3.987 per cent last month and the yield on the six-month bill unchanged at 2.984 per cent.
Prime minister Jose Socrates, met German chancellor Angela Merkel in Berlin later in the day.
There are growing doubts about Germany’s willingness to support expanding or reconfiguring the bloc’s rescue fund enough to calm investors, following a regional election drubbing for Dr Merkel and growing parliamentary pressure.
On Monday, Portugal’s finance minister said Europe must take tougher action within weeks to protect peripheral economies against market attacks or austerity efforts to overcome the weaknesses of Portugal’s economy would count for nothing.
“I think it has been clear that there is no problem for Portugal getting t-bills sold,” said Ioannis Sokos, strategist at BNP Paribas in London. “[But] if there is no major change to the EFSF [European Financial Stability Facility] during the European summits this month . . . Portuguese yields will not fall and it will be a matter of weeks before it has to tap the EFSF, because issuing bonds at 7.5 per cent is unreasonable.”
– (Reuters)
