Sovereign bonds: Portugal passes milestone on a difficult road

Chris Wright
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The country’s recent sovereign bond might or might not amount to a return to full market access, but it is certainly a positive development. Its progress on its economy and the state of its banks is equally crucial.

In early May, Portugal took to the bond markets in style. The sovereign raised €3 billion in 10-year funding in a deal that attracted a €10 billion-plus book from 369 investors. It did so at almost the same spread it had paid for five-year funds a couple of months earlier. "That’s quite a statement," says PJ Bye, global head of public-sector debt syndicate at HSBC, one of the leads on the deal.

So, is that it? Portugal rehabilitated in the eyes of the world’s investors, with ready access to funding, over the worst and ready to rebuild? The bond is unquestionably good news and a vote of confidence, but Portugal remains a sub-investment-grade developed-world economy with precious little growth and a troubled banking sector. Progress has been made, but there are plenty more hills ahead.

The bond issue was important, and not just because...