Crisis-hit Portugal offers bonds in key market test

LISBON, April 1 (Reuters) – Portugal will seek to sell up to
1.5 billion euros of bonds at an extraordinary auction on
Friday, testing investor appetite for its debt after its
president on Thursday called a snap election for early June.

Revised budget figures for last year have added to Lisbon’s
woes as it seeks to avoid taking an international bailout and it
has 9 billion worth of debt repayments due in April and June
that investors speculate may push state finances over the edge.

The country’s debt agency IGCP called Friday’s tender on
Thursday, saying there was “specific demand” for its June 2012
bonds — a suggestion it had already lined up buyers for the
sale.

Bond yields spiked to new record highs on Thursday on the
back of figures showing the 2010 budget deficit was more than a
percentage point higher than the 7.3 percent of GDP targetted by
the government.

Secondary market yield for the June 2012 bond was at 7.1
percent on Friday, little changed from Thursday, but way above
4.33 percent paid in mid-March to place 12-month T-bills, which
is the closest comparable maturity. In the last auction of June
2012 bonds in July 2010, they yielded 3.159 percent.

Prime Minister Jose Socrates, who now heads a caretaker
government, has resisted asking for an international bailout
after Greece and Ireland, but his resignation last week after
parliament rejected budget austerity threw the country into
political crisis and prompted downgrades by rating agencies.

Portugal has to redeem 4.2 billion euros of bonds on April
15 and 4.9 billion euros in June, with many economists saying
that while the country has probably raised enough funds for the
first redemption it would have to tap markets under difficult
conditions to meet other needs and the second repayment.

The IGCP said the auction would be held at 9.15 a.m (0815
GMT). The results normally come out about 20 minutes later.

The premium investors demand to hold Portuguese benchmark
10-year bonds was practically unchanged at 535 basis points on
Friday after Thursday’s euro lifetime record highs.
(Reporting by Andrei Khalip; editing by Patrick Graham)

Crisis-hit Portugal offers bonds in key market test