Portugal plans to create a cushion liquidity before its exit from the bailout program, after the 5-year bond sale. The amount of 3.25 billion euros from the disposal of these bonds will cover almost half of the country’s financing needs for 2014, that are estimated at 7 billion. The remaining amount will be covered by domestic and retail sources, said the head of the Public Debt Management Agency of Portugal Mr Joao Moreira Rato, adding that they now focus on creating a cushion for 2015.
Mr Rato did not mention, what is the goal for the reserve and noted the costs involved in raising funds to be reserved to the state balance sheet. It makes sense as we move to meet the financing needs for 2015, but we can not have a goal in mind and take into account the costs of holding, said the official. The model for Portugal is Ireland, which has accumulated a liquidity reserve of about 20 billion before its exit from the bailout program in December. The cushion that helped to reassure investors that Dublin would be protected from any turbulence in financial markets in 2014, which could, for example, arise from the plans of the U.S. central bank to reduce program of bond buying.
Portugal plans to leave in June by the 3-year bailout of 78 billion euros. Yields on Portuguese bonds, as bonds of other countries of the Eurozone periphery have fallen sharply since the beginning of 2014, with investors attracted by higher yields compared with those of other countries and are increasingly confident that the Eurozone debt crisis has abated. The yield on 10-year Portuguese bonds has fallen to 5.4%, the lowest level since last May, from over 6% in the first days of 2014. However, borrowing costs of Portugal remains significantly higher than that of Spain, Italy and Ireland, reflecting continued uncertainty about the success of the rescue.
By Nicole P.