Historical day for Portuguese debt
It was for brief moments and for a very short margin, but November 26, 2020 will go down in history as the first day when the yield on 10-year Portuguese debt securities showed a negative sign for the first time. An unthinkable milestone not many months ago, which results from the ultra-expansionary monetary policy being conducted by the European Central Bank. By coincidence, this milestone was reached on the day the State Budget was approved in a final global vote.
At the close of the session, the yield on government bonds was 0.003%, down 1.2 basis points from the previous day. Yield half touched -0.001%, so investors agreed to pay to buy Portuguese debt that will only be repaid in 10 years. These rates are those practiced in the secondary market, where investors exchange debt with each other. So far Portugal has never been able to finance itself at negative 10-year emissions rates.
The session saw a decline in European sovereign debt, with the bundle rate at 10 to drop 1 basis points to -0.59%.
This evolution takes place on a day when investors are again turning to refuge assets, such as the sovereign debt of certain euro countries, which leads to an increase in bonds and, consequently, to a decrease in interest rates.
The drop below the 0% barrier is the culmination of a series of falling sessions, which was driven by Joe Biden’s victory in the United States presidential elections, and common to most sovereign debt in the Eurozone. At the same time, bonds have benefited from the European Central Bank’s asset purchase programs, which have guaranteed liquidity to the market.
“In addition, the Treasury Bond offer is expected to decline next year, so that the net issuance of OT will be negative (net issues, deducting ECB redemptions and purchases from the offer),” explained Danske’s chief analyst. Bank, Jens Peter Sørensen, to Business. For Sørensen there is yet another factor to pull on the Portuguese debt: the funds guaranteed by the European SURE program (Support to mitigate Unemployment Risks in an Emergency) and the guarantees of the Recovery Fund will support the economy and may further reduce the issuance of new bonds .
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