Enviado: 9/2/2010 17:43Portugal to Sell Bonds Via Banks Amid Deficit Concern
By Caroline Hyde and Anna Rascouet
Feb. 9 (Bloomberg) -- Portugal hired banks to help it sell bonds amid concern the nation will be forced to pay more to borrow as it struggles to cut its budget deficit.
Portugal plans to issue 10-year notes in euros, according to two bankers involved in the transaction. Barclays Capital, Banco Espirito Santo SA, Credit Agricole CIB, Goldman Sachs Group Inc. and Societe Generale SA are managing the sale, said the bankers, who declined to be identified before the transaction is completed.
The nation has pledged to reduce its budget gap of 9.3 percent of gross domestic product by more than half in three years to meet European Union limits. Portugal’s public debt will rise to 91 percent of economic output by 2011, from 77 percent last year, according to European Commission forecasts.
“Syndication is a safe way to raise money,” said Giuseppe Maraffino, a fixed-income strategist at UniCredit SpA in Milan. “I expect Portugal to pay a premium, but it has to fund itself. It could be a good deal to launch a new bond.”
Portugal will sell the bonds subject to market conditions, said the bankers. It last hired banks to sell bonds through a syndicated deal in August, when it issued debt in dollars, according to data compiled by Bloomberg. Its last 10-year bond sale via banks was in March, when it raised 4 billion euros ($5.5 billion), Bloomberg data show. The notes were priced to yield 135 basis points more than the benchmark mid-swap rate.
Alberto Soares, chairman of Portugal’s government debt agency in Lisbon, confirmed the planned bond sale but declined further comment.
Bonds Tumble
Portugal’s existing bonds have tumbled this year and the cost of insuring against losses on the debt using credit-default swaps has soared to a record. The country has been affected by concern that European nations including Greece, Spain and Ireland will fail to meet EU rules to cut budget deficits to less than 3 percent of GDP. Speculation is growing that a meeting of European leaders on Feb. 11 to lay the groundwork for a 10-year economic program for the region will be dominated by bailout discussions.
“When a deficit has to be financed, timing becomes a minor issue,” said Michiel De Bruin, who helps manage $28 billion of assets as head of euro government bonds at F&C Investments in Amsterdam. “Sovereign markets are tremendously volatile. At a certain stage a pragmatic decision has to be made to come to market.”
Higher Yield
The yield on Portugal’s outstanding 10-year note has soared 63 basis points to 4.69 percent since Jan. 1, increasing the premium investors demand to hold the securities instead of benchmark German bunds to 154 basis points. That’s against an average of 30 basis points in the past 10 years. A basis point is 0.01 percentage point.
Credit-default swaps tied to Portugal’s bonds fell to 240 basis points, from an all-time high of 244.5 yesterday, according to CMA DataVision prices. That means it costs $240,000 a year to insure $10 million of debt for five years, up from about $82,000 at the start of the year.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a country or company fail to adhere to its debt agreements.
Standard & Poor’s lowered the outlook on Portugal’s A+ rating to negative in December and Moody’s Investors Service also has a negative outlook on its Aa2 rating. Fitch reduced the outlook on its AA grade to negative in September.
Greece, Spain and Ireland have also done syndicated bond sales this year. Portugal is planning its 10-year issue after it reduced a planned 500 million-euro sale of 12-month bills by 200 million euros on Feb. 3, according to data compiled by Bloomberg.
“They think they need to do it, conditions are not likely to improve materially, let’s get it done,” said Gianluca Salford, a fixed-income strategist at JPMorgan Chase & Co. in London. “If you end up having to issue a few billion at very expensive levels it does very, very little to your debt sustainability.”
Um abraço,
The Mechanic
Dívida em % do PIB na Europa (World Factbook 2009 est.):
