Historic day for the Portuguese debt. Correct Stocks and Oil – Markets in a Minute

Historic day for the Portuguese debt

It was for short moments and for a very short margin, but November 26, 2020 will go down in history as the first day that the yield on Portuguese 10-year debt securities first showed a negative sign. An unthinkable goal not many months ago, the result of the ultra-expansionary monetary policy conducted by the European Central Bank. Coincidentally, this milestone was reached on the day the state budget was approved in a final global vote.

At the close of the session, the government bond yield was 0.003%, down 1.2 basis points from the previous day. Half of the yield hit -0.001%, so investors agreed to pay to buy Portuguese debt which 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 with negative 10-year emissions rates.

The session saw European sovereign debt decline, with the bundle rate at 10 to drop 1 basis point to -0.59%.

This evolution takes place on a day when investors are turning back to safe-haven assets, such as the sovereign debt of some 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 declining sessions, led by Joe Biden’s victory in the US presidential election and common to most of the Eurozone sovereign debt. At the same time, the bonds benefited from the European Central Bank’s asset purchase programs, which ensured liquidity to the market.

“Furthermore, the supply of treasury bills is expected to decrease next year, so that the net issuance of OT will be negative (net issuance, minus redemptions and ECB purchases from the offer),” explained the chief analyst at Danske Bank, Jens Peter Sørensen, to Business. For Sørensen there is yet another factor pulling the Portuguese debt: the funds guaranteed by the European program SURE (Support to mitigate Unemployment Risks in an Emergency) and the guarantees of the Recovery Fund will support the economy and could further reduce the issuance of new bonds.