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<b>Portugal - The quest for domestic investors</b>

    Headline: Portugal - The quest for domestic investors
Source: Euromoney
Date: March 2000
Author: Peter Wise

For Portugal, like other smaller European government borrowers, the euro is proving a double-sided coin. Sovereign debt issued in the single currency is attracting welcome new non-resident investors. However, the domestic funds that once sustained trading volume have diversified into other euro markets. Peter Wise reports

Strong economic growth, syndicated sovereign debt issues and the highest spread on treasury bonds in the eurozone have helped Portugal face up to increased competition as a government bond player on a pan-European level.

Joaquim Pina Moura

Since January 1999, though, the Portuguese banks and local institutional investors that nourished the domestic market before the single currency are thought to have moved more than half of their portfolios into other euro markets that offer greater liquidity. Portuguese investment funds had 58.3% of their portfolios invested abroad at the end of 1999, compared with 40% a year earlier.

"We have seen domestic investors exchange the higher spreads available in Portugal for the greater liquidity offered by bigger European markets," says António Catana, head of fixed-income trading with Banco Português de Investimento.

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