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In early May, Portugal took to the bond markets in style. The sovereign raised €3 billion in 10-year funding in a deal that attracted a €10 billion-plus book from 369 investors. It did so at almost the same spread it had paid for five-year funds a couple of months earlier. "That’s quite a statement," says PJ Bye, global head of public-sector debt syndicate at HSBC, one of the leads on the deal. So, is that it? Portugal rehabilitated in the eyes of the world’s investors, with ready access to funding, over the worst and ready to rebuild? The bond is unquestionably good news and a vote of confidence, but Portugal remains a sub-investment-grade developed-world economy with precious little growth and a troubled banking sector. Progress has been made, but there are plenty more hills ahead.
The bond issue was important, and not just because of the money. Although Portugal had tested the waters with a tap of an existing deal in January, this was the first new government bond issue since the country requested an international lifeline two years ago. That €78 billion bailout was a three-year programme from which Portugal is due to depart in June 2014; a condition of its exit – which will be a milestone for Portugal – is that the country demonstrates it has regained full market access.
