Portugal was obliged to increase the yield it was offering at a tender for one-year securities held on Wednesday, the first since the Constitutional Court earlier this month ruled that a number of cost-cutting measures included in the 2013 budget were illegal.
The government’s debt management arm IGCP managed to sell 1.75 billion euros in three- and 12-month bills, meeting its maximum target for the issue. The one-year securities were sold at an average yield of 1.394 percent, up from 1.277 percent at an auction held in February. The bid-to-cover ratio for the issue was 2.1 times the amount sold, down from 2.3 times in February.
The IGCP also placed 250 million euros in three-month paper at an average yield of 0.743 percent, down slightly from 0.757 percent at a tender held in March. Bids surpassed the amount sold by 4.8 times, compared with 3.9 times last month.
Despite the setback to the government’s budget plans posed by the Constitutional Court, confidence in Portugal has improved significantly since last year when it was obliged to offer three to four times more to sell one-year debt. Portugal’s European partners last week granted the country a seven-year extension on the timetable for paying back the 78-billion-euro bailout it received.
The government plans to make deeper cuts in spending on health, education, social security and at state-owned companies to compensate for the 1.35 billion euros in previous reductions that the Constitutional Court threw out.