WRAPUP 1-Portuguese bonds sell, Brussels okays debt plan

* Portugal sells 2 bln eur of 2-, 10-year bonds

* European Commission approves budget plan, has some doubts

* 10-year yield spread widens against German Bunds

By Shrikesh Laxmidas and Marcin Grajewski

LISBON/BRUSSELS, April 14 (BestGrowthStock) – Portugal successfully
sold 2 billion euros ($2.73 billion) of two- and 10-year bonds
on Wednesday and won qualified support from the European
Commission for its plans to cut the budget deficit.

But while the country saw strong demand for its bonds,
investors priced in higher risk for the longer-dated issue and
spreads rose in the secondary market following other peripheral
euro zone countries.

Portugal accepted bids for 1.195 billion euros of government
bonds maturing in 2020 at an average yield of 4.340 percent and
805 million of 2-year bonds at 1.715 percent. It had hoped to
raise between 1.5 billion and 2 billion euros in total and the
placement came at the top end of the range.

Analysts said the sale showed Portugal did not face
challenges in issuing debt on a par with Greece, after some
economists had identified it as the next possible weak link in
the euro zone.

Euro zone finance ministers approved a 30-billion-euro
emergency aid mechanism for debt-plagued Greece on Sunday but
investor doubts, a German legal threat and persistent confusion
over its terms are clouding the deal. [ID:nLDE63D0QX]

In Brussels, the European Commission said Portugal’s plan to
cut its budget deficit to 2.8 percent of gross domestic product
in 2013 from 9.4 percent last year, was “ambitious and
concrete”. [ID:nLDE63D16M]

But it said additional fiscal cutbacks may be necessary if
economic risks materialised.

“Achieving the ambitious fiscal consolidation path may
require efforts beyond those outlined in the programme,” the
Commission’s report said.
For a graphic showing Portugal key economic indicators, please
click on http://link.reuters.com/far94j

Portuguese Finance Minister Fernando Teixeira dos Santos
said the EU’s verdict on the plan, which includes public sector
wage moderation and caps on personal and company tax breaks, was
a clear sign of support.

He said no more measures were necessary now.

“At this moment, that possibility (of additional measures)
does not present itself. We have a set of measures identified in
the plan … The challenge ahead of us is to immediately start
implementing these measures,” he said. [ID:nLDE63D1IA]


Financial markets seemed less certain.

Debt markets continued to price in risk as the premium
investors demand to hold 10-year Portuguese government bonds
rather than euro zone benchmark German Bunds rose 5 basis points
to 129 bps after the auction, its widest since last week.

“The short-dated issue seems to have been absorbed without
too much trouble … but the long dated was more difficult to
absorb, looking at post-trading,” said Orlando Green, strategist
at Credit Agricole CIB in London.

“This is a relatively new bond and given it will be tapped
many more times during the year, investors may prefer to wait
for a more risk-friendly environment to take this bond on
board,” he said.

The 2012 paper attracted bids for 2.5 times the size of the
issue, while the bid-to-cover ratio was a lower 1.6 times for
the 2020 bond.

With Wednesday’s auction, the country has issued about 9
billion euros in treasury bonds so far this year, nearly half
its total planned 2010 issuance of up to 22 billion euros.

“The placements ran well, demand was strong and it shows …
Portugal will not have major problems placing its debt, as
Greece has,” said Filipe Silva, a fixed rate assets manager at
Banco Carregosa.
Stock Market Advice

(Reporting by Axel Bugge, Shrikesh Laxmidas, Sergio Goncalves,
Filipa Lima and Kirsten Ridley; editing by Mike Peacock)

WRAPUP 1-Portuguese bonds sell, Brussels okays debt plan