March 9, 2016 / 10:59 AM / 2 years ago

Portugal borrowing costs jump in bond auction

LISBON, March 9 (Reuters) - Borrowing costs in Portugal’s first regular bond auction of the year rose sharply on Wednesday for both five and 10-year debt, reflecting higher secondary market yields after a sell-off last month when worries reemerged over public finances.

State debt agency IGCP sold a total of 1.215 billion euros in both maturities, near the top end of its indicated offer range of up to 1.25 billion euros.

The IGCP sold 621 million euros in 2026 bonds at an allotment yield of 3.138 percent, up from 2.43 percent in the previous auction of 10-year bonds in November.

Yields for the 2021 bonds rose to 2.03 percent from 1.42 percent in the previous sale of five-year debt last July.

Demand in the auction outstripped the amount placed by 1.6 times for the 10-year maturity and by 1.54 times for the shorter-dated bonds.

About a month ago Portugal’s bond yields spiked to their highest since 2014 in the secondary market as investors singled out the country as a centre of concern over the health of Europe’s financial sector and economic growth.

Those worries were exacerbated by concerns about the country’s finances under a new left-leaning government that has been reversing austerity imposed by the previous administration under the country’s 2011-14 bailout.

Yields have retreated since, but are still higher than where they started the year.

As in the previous sales and in the secondary market, investors prefer to focus on the European Central Bank’s bond-buying programme encompassing Portuguese debt. (Reporting By Andrei Khalip, editing by Axel Bugge)

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