PUBLIC FINANCES

Portugal’s borrowing costs drop to four-year low at bill auction

Debt agency meets issuing target of 1.25 billion euros

Portugal’s borrowing costs fell to the lowest in four years as the government sold 1 billion euros of 12-month bills.

The securities, due in February 2015, were issued at an average yield of 0.75 percent, the country’s debt-management agency IGCP said. That compares with an average yield of 0.869 percent at a previous auction of 12-month bills on January 15 and is the lowest rate for comparable-maturity debt since October 2009. The auction attracted bids for 2.12 times the amount allotted, compared with 2.26 times in January. The IGCP had been looking to see between 1 billion and 1.25 billion euros at the tender.

The debt agency also sold 250 million euros of three-month bills due in May 2014 at an average yield of 0.462 percent, attracting bids for 6.26 times the amount offered. That compares with an average yield of 0.495 percent at a previous auction of three-month bills on January 15, with a bid-to-cover ratio of 4.71.

Portugal is trying to regain full access to debt markets with the end of its 78 billion-euro rescue program from the European Union and International Monetary Fund approaching on May 17. It has raised 6.25 billion euros selling bonds through banks so far this year as signs of economic recovery spurred a rally in higher-yielding European fixed-income assets.

Portugal plans gross bond issuance of between 11 billion euros and 13 billion euros in 2014, and the IGCP expects to reintroduce bond auctions in the first half of this year. The country has already started to obtain funding for 2015, the IGCP said on February 11 after completing a sale of 3 billion euros of 10-year bonds.