Portugal raises €500M at negative interest

 In Bonds and Gilts, News

Portugal went to the markets on Wednesday morning and auctioned €500 million of short term bonds at -0.302% interest in what could be the last auction enjoying negative interest.

The treasury and debt management agency IGCP auctioned three-month bonds. The last time it auctioned similar maturities in April the interest was -0.655%. So, in just three months the negative tax rate fell by a half, with the expectation that at the next auction interest rates on three month bonds will be positive for the first time since 2016. It means that the government will have to pay interest to investors on the bonds.
The IGCP saw fierce demand for the bonds which outstripped supply by €500 million, making the process more competitive.
“Although Portugal still managed to issue bonds with a negative yield, the truth is that this negative yield is going down significantly”, Filipe Silva, Director of Banco Carregosa told ECO online.
The bond auction took place on the back of turbulence in European debt markets with investors putting pressure on countries like Italy, Spain, and Portugal, forcing the European Central Bank (ECB) to hold an emergency meeting to discuss measures to calm debt market mistrust and stop interest rates rising on sovereigns.
Greater inflationary pressures, a phenomenon aggravated by the war in Ukraine, has led to a sharp shift in the direction of ECB monetary policy. Mass bond purchases by the central banks are ending, while official rates are already being ratcheted up. In the financial markets, this change has been reflected in a sharp rise in sovereign debt yields — a trend which, due to their role as a benchmark, has also affected other financial assets.