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Portugal bond auction raises 1.25bn euros | |
(about 4 hours later) | |
Portugal has raised 1.249bn euros (£1.04bn; $1.62bn) in an auction of four and 10-year bonds. | |
The yield, or the interest rate Portugal must pay to borrow funds, on the 10-year bond was an average 6.719%. | |
Markets had been watching closely to see how easily - or not - the debt-hit nation could raise funds. | |
Yields had hit a recent fresh high on its 10-year bonds of 7.3%, before falling to 6.77% on Wednesday morning before the auction. | |
'Bail-out worry' | |
The sale was seen as a measure of Lisbon's ability to raise funds on the financial markets after its debt and deficit problems raised the amount it had to pay to borrow cash. | |
"But even with this auction, most now consider it a question of when, not if, Lisbon will join the list of eurozone governments turning to Europe and the IMF for emergency support," said BBC economics editor Stephanie Flanders. | |
"European policy makers - and investors - worry about a Portuguese bail-out, not because of any inherent concern for that country, but for what it symbolises - and for what might happen next." | |
'ECB active' | |
Bond buying by the European Central Bank (ECB) had helped keep the yield below 7%. | |
"Probably the most important thing for the 10-year yield is that the 7% level was not breached," said Michael Leister, of West LB in Duesseldorf. | |
"The ECB have been very active in past days stabilising the market and sentiment. | |
"It remains to be seen over the coming trading session whether this will be a turnabout for Portugal and whether recent spread tightening can be sustained." | |
The four-year bond yield was 5.396%. | |
Bail-out? | |
There has been speculation Portugal could join Greece and the Irish Republic in needing an international bail-out, something it has denied. | There has been speculation Portugal could join Greece and the Irish Republic in needing an international bail-out, something it has denied. |
The country's borrowing costs have surged as investors worried over its financial health. | The country's borrowing costs have surged as investors worried over its financial health. |
Lisbon has argued its situation is different from Greece and the Irish Republic - both of which have agreed to bail-outs from the European Union and International Monetary Fund. | |
It says that its deficit and debt are lower than those nations, that it has not suffered a bubble in property prices and that its banks are sound. | It says that its deficit and debt are lower than those nations, that it has not suffered a bubble in property prices and that its banks are sound. |
And the European Commission has said there are no discussions under way on an EU-International Monetary Fund bail-out of Portugal. | And the European Commission has said there are no discussions under way on an EU-International Monetary Fund bail-out of Portugal. |
However, some analysts still believe the country will need to seek funding help. | |
"Our country analysts still forecast that Portugal will be required to receive funds from the emergency credit facility," said Kevin Dunning, economist at the Economist Intelligence Unit. | |
"And there is a high risk that if the interest charged on those funds is as high as for Ireland, this will slow Portugal's efforts to reduce its budget deficit." | |
Spanish auction | Spanish auction |
Analysts believe that while Europe could support Portugal, a bail-out of Spain would stretch the existing bail-out fund. | |
Greece was the first eurozone nation to take a bail-out when a three-year 110bn-euro deal was agreed. | Greece was the first eurozone nation to take a bail-out when a three-year 110bn-euro deal was agreed. |
The Irish Republic's 85bn-euro bail-out package was agreed last month. | The Irish Republic's 85bn-euro bail-out package was agreed last month. |
A debt sale due on Thursday by Spain will also be closely watched by investors. | A debt sale due on Thursday by Spain will also be closely watched by investors. |