Investors keener on lending to Portugal

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Investors keener on lending to Portugal

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Good news for the Portuguese government on Wednesday with a fall in the interest rates it had to offer to sell 1.5 billion euros of short term treasury bills, due to be paid back in three or six months.

However traders pointed out that volumes were extremely thin, indicating that broad sentiment on the junk-rated country was very fragile and could easily worsen again.

Portuguese debt has taken a beating in recent weeks on increasing fears the country may go the way of Greece and need a second bailout.

But Joao Pereira Leite, who is in charge of investment at Banco Carregosa, said there are many factors at play: “The Portuguese government is doing the right things but in the macroeconomic scenario it all depends on the global situation, not only the Portuguese situation. Whatever we are doing now, we are doing the rights things, but the results will only come in the long term.”

Portugal’s government insists it has no intention of asking for more money to top up its current 78 billion euro bailout from the European Union and IMF.

It said it will stick to a strategy of meeting strict budget goals and reforming its economy to boost confidence.

Prime Minister Pedro Passos Coelho said this week that Lisbon would meet the demands of its current bailout “whatever the cost.”

The austerity demanded by the bailout, including salary cuts for civil servants and across-the-board tax hikes, has already sent Portugal into its worst recession since the 1970s and left unemployment at its highest level in decades.