Portugal struggles to match Irish route back into international bond markets

Portugal is going to have a tough time following Ireland’s route back into the bond markets.

Its first post-bailout venture — a bond swap — was right out of the Irish playbook. But further down the road, subdued attempts to woo investors and deeper fiscal woes stand in Lisbon’s way.

Portugal last month carried out the bond swap in an identical manner to the one Ireland ran in January.

That move, by the National Treasury Management Agency, later kicked off a flurry of bond activity which included another swap, a first amortising issue and the pinnacle — the raising of new long-term debt.

It was a clear success for Ireland which, like other bailed-out states, had been locked out of capital markets because of fears it could not repay its debt.

The NTMA plans to sell €500m of short-term debt tomorrow.

The Government credits the success to a strict implementation of its bailout programme, the return last year to economic growth and a punishing schedule of investor roadshows that started back in May 2011.

Unlike Ireland, Portugal has had to grapple with recession, angry demonstrations, emergency budget cuts, and — according to the head of Dublin’s debt agency — a self-imposed exile from the investor roadshow circuit.

“Portugal has sort of disappeared from the international circuit,” John Corrigan, chief executive of the NTMA, said earlier in the year. He contrasted this with Ireland’s action after getting a bailout from the EU, ECB, and IMF troika.

“With Ireland’s entry into the troika programme, we took the view that we needed to actually redouble our investor relation efforts… It is a slow, deliberate process but one which I believe is starting to pay dividends.”

The NTMA met more than 200 institutional investors from Europe to North America, Asia, and the Middle East, putting forward the case for an Irish recovery. More recently, Mr Corrigan’s team held meetings in China, the US, and Europe.

Portugal only recently began roadshows in Lisbon where it invited international investors to explain its recovery strategy.

It is not just a question of timing and style, however. Just 17% of Irish debt was in domestic hands at the end of June, leaving the agency with a relatively untapped buyer base at home when it began to plot a market return. The NTMA in August raised the first €1bn of an expected €3bn-€5bn from the two types of bonds.

With the domestic/foreign ownership split in Portugal closer to 50/50, fewer avenues would appear open to them.

Ultimately, however, the successful full return to the bond markets will depend on the economy.

This country’s export-orientated economy eked out growth last year and avoided joining most of the eurozone in recession.

Portugal, by contrast, is one of those countries feeling the strain most.

“Ireland is seen as [one] who had been doing terribly well and suffered a setback, but it is an open, growing economy that has largely capped its bank problem,” said Luca Jellinek at Crédit Agricole in London.

“But, with Portugal, the question of a second bailout will not go away. One can’t help noticing the quality of their fiscal work is deteriorating as is the political situation.

“Basically, investors are asking: ‘How the hell will Portugal grow?’ ”

Reuters