(Adds comments from leads, Portuguese debt agency)
By Michael Turner
LONDON, Jan 11 (IFR) - The Republic of Portugal is paying a
hefty price for its first syndicated trade since April 2016, a
sharp contrast to last week's Ireland 20-year trade as the
differing fortunes in the sovereigns' recoveries are plain to
Lead managers on the April 2027 euro benchmark have set the
reoffer level at 352bp over mid-swaps, the tight end of the
352bp-355bp guidance on demand of over 8.5bn. This will equate
to a yield of around 4.23%.
While the final spread is inside the initial price thoughts
of plus 360bp area, the trade is coming at a much more expensive
level for Portugal than its most recent 10-year syndications.
"It's a reflection of where the market is at the moment,"
said a lead. "But I do not think the new issue premium they are
paying is particularly high or low. It is closer to 10bp than
Portugal's 4bn 10-year in January 2016 came with a 2.973%
yield at 205bp over swaps. A 500m 30-year in April 2016 priced
"The last 10-year was in early 2016 and things are a little
bit different for the whole market now," said the lead.
Portugal's travails could not be more different from
Ireland's stellar performance since the eurozone sovereign
Ireland sold a 20-year last week at 50bp over swaps and has
taken advantage of record low rates over the past two years to
issue longer dated debt at progressively lower costs.
Portugal, on the other hand, is grappling with a banking
sector creaking under the weight of bad loans, while support
from the ECB is waning as it runs out of Portuguese bonds to buy
under its Public Sector Purchase Programme.
Nonetheless, the head of Portugal's debt agency says the
country has turned a corner.
"Despite the current yields, most investor concerns seem to
have abated as Portugal has been able to post one of the highest
quarterly GDP growth rates in quarter three last year," said
Cristina Casalinho. "In Q3 last year, both investment and
exports have resurged and helped the economic recovery."
BBVA, HSBC, JP Morgan, Morgan Stanley, Novo Banco and
Societe Generale are managing the RegS/144A transaction, which
will price later on Wednesday.
Portugal is rated Ba1 by Moody's and BB+ by S&P and Fitch.
(Reporting by Michael Turner, additional reporting by Abhinav
Ramnarayan, Editing by Helene Durand, Julian Baker)