Portugal pays 0.62% coupon on bonds in Chinese currency

27 June 2019

The interest rate on Portugal’s three-year bond issue in China’s currency on 30 May is 0.62% following a currency risk hedging operation, the Portuguese finance minister said on Wednesday in Lisbon.

Mário Centeno, speaking at the hearing of the Parliamentary Committee on Budget, Finance and Administrative Modernisation (COFMA), acknowledged that the interest rate on this issue “compares poorly” with the three-year rates with which Portugal has been financing itself.

Portugal placed 2 billion renminbi (equivalent to 260 million euros) in three-year bonds, in what was the first issue in Chinese currency by a Euro Zone country and the third in a European country.

The Treasury and Public Debt Management Agency (IGCP) reported that investor demand for the securities was “strong”, 3.165 times the amount placed, and made it possible to revise the interest rate downwards to 4.09%.

The Minister of Finance admitted the interest rate of 0.62% is a “major effort for the Portuguese Republic,” noting that “the premium that is being paid is exactly” what is needed “to diversify sources of financing,” according to Portuguese news agency Lusa.

IGCP president Cristina Casalinho said in the week before the operation that this issue of “panda bonds” was an “opportunity” for Portugal to continue to broaden its investor base and said the operation took two years to be negotiated. (Macauhub)