Portugal bond sale successful, though rate high (AP) (12-01-2011)

LISBON, Portugal (AP) -- Portugal was able to raise euro1.25 billion ($1.62 billion) in a bond auction Wednesday which analysts said was encouraging, though bigger improvements will be needed in the future to avoid a bailout. Demand was strong, but rates were higher to entice investors.

The average yield on the shorter-term loan was 5.4 percent, up from 4 percent in the last sale, while the yield on longer bonds was 6.7 percent -- slightly down from 6.8 percent at the last similar auction and a comforting sign for the government's efforts to allay market concerns about its fiscal soundness.

High demand for the bonds -- the agency said Portugal could have sold more than double the amount offered -- reassured authorities the country can still finance itself on international markets.

However, the crucial question for Portugal is how long it will have to pay the high rates, especially as the economy is forecast to slip back into recession this year, keeping pressure on public finances. Portugal needs to raise up to euro20 billion on financial markets this year.

China had earlier vowed to help Portugal, as it has supported Greece and Spain, by buying their debt. Though details have not been released, reports suggest China is ready to invest at least euro4 billion.

Source: AP