Portugal gets pass mark in rehearsal of return to debt markets

Debt management agency swaps 3.7 billion euros in three-year bonds for outstanding issue

The Portuguese Treasury on Wednesday successfully completed a bond swap in what was its first long-term debt issue since the country received a bailout of 78 billion euros from the European Union and the IMF 16 months ago.

The IGCP debt management agency said it exchanged 3.757 billion euros in bonds due October 2015 carrying a coupon of 3.35 percent for outstanding bonds due to mature in September 2013 carrying a coupon of 5.45 percent. The IGCP had been looking to swap as much as 9.6 billion euros in bonds.

The issue was seen as a test of Portugal’s ability to return to the debt markets from September of last year.

“This marks a first step for Portugal to regain access to medium- and long-term debt markets,” said Joao Moreira Rato, the chairman of the IGCP. “This transaction allows the extension of debt stock maturity, taking advantage of the continuous improvement in secondary market conditions.”

The swap reduces the amount of debt maturing when Portugal plans to return to the markets.

“The result was quite satisfactory because it indicates there is interest from investors to extend their exposure to Portuguese debt,” Bloomberg quoted Filipe Silva, who manages 60 million euros of securities at Banco Carregosa in Oporto, as saying. “If we see this exchange as a market test, I’d say that Portugal passed.”

Finance Minister Vítor Gaspar is due later Wednesday to announce a series of budget measures to replace the lost revenue that would have accrued from an increase in workers’ social security contributions. The government abandoned that plan after a massive street protest against the move.

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