Portugal carries out final sovereign debt auction of 2010

10 November 2010

Lisbon, Portugal, 10 Nov – The Portuguese government is due Wednesday to auction sovereign debt of between 750 million and 1.25 billion euros, at a time when the interest rate is close to 7 percent, the barrier, which according to the country’s Finance Minister, separates the country from the International Monetary Fund (IMF).

The last public debt auction of 2010 – two series of six- and ten-year Treasury Bonds – will be a kind of economic viability test for the country, as an increase in the interest rate requested in order to take on debt could make it inevitable that the country resorts to use of the European Stability Fund and the IMF.

In the secondary market – exchanges between investors – since the beginning of November interest rates demanded in order to take on Portuguese sovereign debt have been above 6 percent, and on Tuesday even briefly exceeded 7 percent, or over 4.6 basis points more than German sovereign debt, which is the benchmark.

Portugal’s Finance Minister, Fernando Teixeira dos Santos, said Tuesday that Portugal would reduce its 2010 budget deficit by two percentage points to 7.3 percent of GDP and added that authorised measures outlined in the State Budget for 2011 would be applied in order to make the budget deficit drop to 4.6 percent of GDP. (macauhub)