50% of Portugal’s debt held by central bank
Portugal is more dependant on its central bank than any other country in the EU in terms of the amount of government sovereigns held.
This is according to a report on sovereign debt from the OECD which calculated that out of 38 countries most dependant on their central banks, Portugal was the most dependent, with the Bank of Portugal holding 50% of its debt.
According to the OECD some 25% of a country’s sovereign bonds on average are held by central banks.
However, this amount varies from 0% in Chile, the Czech Republic, Denmark and Norway to 50% in Portugal.
The OECD also states that market conditions have deteriorated with the tightening of the money supply and a reduction in the buying up of sovereign bonds, while advising using a variety of instruments for capital.
The main factors cited for this decline were macroeconomic uncertainty, monetary policy developments, geopolitical risks, and a deterioration in investor confidence.
The OECD states that the reversal of programmes to buy sovereign debts by central banks has put pressure on the market in various ways which could increase costs for market traders and, as a consequence, returns. However, the exact effects will depend on the rate and magnitude of central bank belt tightening policies.
The OECD stressed the importance of debt managers using a variety of instruments to support liquidity as well as improving communication with the markets, using existing securities and securities buybacks.
The organisation also makes mention that the financing needs of countries and debt levels continue to be higher compared to 2019, emphasising that the budgetary spending to deal with the Covid-19 pandemic had led to record issues of sovereign bonds in OECD countries.