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Lisbon succumbed to a €78 billion rescue package in May 2011 but renewed confidence that the eurozone will hang together has fuelled a rally in Portuguese bonds over the past year. The 10-year bond yield recently touched 5.74 per cent, the lowest since October 2010 and down from a peak above 17 per cent early last year. As a result, Portuguese debt was one of the best performing assets in the world last year. The rally helped Lisbon in January to return to the bond market for the first time since its bailout, and has nurtured optimism that the country is on the verge of being able to repeatedly issue debt.
Portugal raised €2.4 billion last month through a “tap” – increasing the size of an existing bond maturing in 2017 – a strategy it is likely to continue in parallel with bond exchanges. Nonetheless, some investors remain cautious on Portugal, citing its recession and weak public finances.
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