Portugal became a full member of the euro club in January 1999, thereby eliminating exchange rate risk on its domestic sovereign debt.
However, its bonds have continued to trade at a substantial spread premium to comparable German or French issues. That’s attractive for investors, but a challenge to the country’s sovereign liability managers.
Most analysts attribute this premium to one of several factors: poor liquidity for many issues in the secondary market, the way the debt is structured, continuing borrowing requirements, and the overall health of and outlook for the Portuguese economy.
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