Banks sell syndicated debt
Portugal will, for the second time this year, issue treasury bonds for sale today on the market after having issued a total of €1.2Bn in bonds with 10 and 14 years maturity.
The IGCP – the Treasury and Public Debt Management Agency directed six investment banks to carry out a syndicated sale of treasury bonds redeemable in 31 years.
According to a source quoted by the agency, the syndicated sale will be carried out soon and will be subject to market conditions. In operations of this kind, the sale is normally done the day after the issuer (in this case the Portuguese State) issues instructions to the banks.
Credit Agricole CIB, Deutsche Bank, Morgan Stanley, J.P. Morgan, Nomura and NovoBanco are the joint lead managers, according to Bloomberg.
The last syndicated sale took place on 1 July 2020 when the IGCP issued €4Bn with a 15-year maturity rate.
The Portuguese State pays 0% interest on the money borrowed as bonds rallied to send benchmark yields below 0% for the first time last year, a dramatic turnaround from the euro-area crisis a decade ago.
The yield on the nation’s 10-year bonds declined to as low as minus 0.014% amid the relentless investor demand for the safety of government bonds in Europe, despite the development of several Covid-19 vaccinations.
The inflow into bonds last year was spurred by waning optimism over a last-ditch trade deal between the UK and the European Union, and as doubts over US fiscal stimulus boosted government debt globally.
The agency headed by Cristina Casalinho chose not to begin this year as usual by issuing a new batch of treasury bonds with a 10-year maturity, opting instead to carry out an auction in which a negative rate (-0.012%) will be paid for the first time to issue €500 million.
So why would investors still purchase these bonds? Because they have good liquidity and there are few options safer than a government bond. As more fixed-income securities become negative-yielding, the yields offered by bonds will continue to enter the negative territory. Thus, some investors buy bonds with negative yields because they believe future bonds will offer even worse returns.