Tough task for Portugal to match Irish bond success



REUTERS

Published — Thursday 15 November 2012

Last update 15 November 2012 5:52 am

| نسخة PDF Print News | A A

DUBLIN/LISBON: Portugal is going to have a tough time following fellow euro zone bailout beneficiary 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. The Irish move later kicked off a flurry of bond activity in Dublin which included another swap, a first amortizing issue and the pinnacle — the raising of new long-term debt.
It was a clear success for Ireland, which like other countries bailed out by European Union peers had been locked out of capital markets because of fears it could not repay its debt.
Dublin credits the success to a strict implementation of its bailout program, the return last year to economic growth and a punishing schedule of investor road shows that started back in May 2011 when bond yields were approaching record highs.
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 Ireland's National Treasury Management Agency (NTMA) said in a speech earlier in the year.
He contrasted this with Ireland's action after getting a bailout from the EU, European Central Bank and International Monetary Fund, known as the troika of lenders.
"With Ireland's entry into the troika program, 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," Corrigan said.
The NTMA met more than 200 institutional investors from Europe to North America, Asia and the Middle East between May 2011 and the early part of this year, putting forward the case for an Irish recovery at a time when most analysts saw a second bailout as virtually unavoidable.
More recently Corrigan's team have held meetings in China, the United States and Europe as it mulls a syndicated issue in dollars, euros or both that would start 2013 off with a bang and make the need for more help seem almost inconceivable.
Portugal's journey has been far more downbeat. It only recently kicked off a series of road shows where it invited international investors to Lisbon to explain its strategy for an Irish-style return.
"The NTMA is more active and more transparent in talking to investors, but it could be a bit of an unfair comparison. The Irish really have to do it now," said David Schnautz, strategist at Commerzbank in New York, referring to a steep post-bailout funding cliff that Dublin has almost fully tackled.
"But just being open to be contacted is not enough. Ireland for example has flagged the types of clients it plans to target. We would not mind getting more information out of Portugal."

HOW WILL PORTUGAL GROW?
It is not just a question of timing and style, however. The traditional foreign-heavy holding of Irish debt — just 17 percent was in domestic hands at end-June — left Dublin with a relatively untapped buyer base at home when it began to plot a market return.
The NTMA detailed plans to diversify its funding in July to attract that group, saying it would issue staged payment, or amortized bonds and inflation-linked paper for the first time. It raised the first 1 billion euros of an expected 3-5 billion euros from the two types of bond a month later.
With the domestic, foreign-owned split in Portugal much closer to 50/50, fewer avenues would appear open to them.
"Portuguese banks and investors have been more involved in its bond market, so there's less low hanging fruit," said Danske Bank's Owen Callan, a Dublin-based primary dealer of Irish bonds.
Ultimately, however, the successful full return to the bond markets will depend on the economy. Again, Ireland is a better sell.
Despite relentless austerity, stubbornly high unemployment and growing numbers struggling to pay their mortgages, Ireland's export-orientated economy managed to eke out growth last year and avoid joining most of the euro zone in recession.
Portugal, by contrast, is one of those countries feeling the strain most, kicking off a debate that has appeared only on the sidelines in Ireland, whether bailout medicine — which recently included the sharpest tax rises in living memory — will only serve to push it into a recessive Greek-like spiral.
Popular patience and political consensus has begun to fray in Portugal — there is a general strike on Wednesday — whereas Ireland, who voted in a centre-right led coalition with a record majority last year has enjoyed industrial peace disturbed only by the occasional, relatively small protest.

That would explain why while both have witnessed big bond market rallies in recent months, the yield on 10-year Portuguese debt is still almost twice that of Ireland's at 8.89 percent.
"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, head of European Rates Strategy at Credit 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."

What's happening around Saudi Arabia

RIYADH: In a fresh boost for relations between Saudi Arabia and Bangladesh, the Kingdom has decided to sign a memorandum of understanding on Foreign Office Consultations (FOC) with Dhaka. The Kingdom endorsed a proposal in this regard at a meeting be...
The Indonesian mission is hopeful detained Indonesian pilgrims will be free “very soon.” The mission is trying to persuade Saudi authorities of their nationals’ innocence.Eleven Indonesian pilgrims, who arrived in the holy city of Makkah to perform U...
JEDDAH: Police at King Khaled International Airport in Riyadh arrested a Saudi hacker after a government organization in Al-Leith in Makkah complained that he had hacked its website, according to an online newspaper.Col. Atti Al-Qurashi, spokesman fo...
JEDDAH: The special criminal court has sentenced a former military official to nine years in jail for joining Daesh and traveling to Syria to fight.A fine of SR5,000 was also slapped on him and he was barred from traveling abroad for nine years after...
JEDDAH: Saudi-Indian ties have reached a new high with the arrival of an Indian Air Force (IAF) flying contingent at the King Fahd Air Base in Taif.The mission, comprising more than 100 high-ranking IAF officers and airmen onboard Sukhoi MKI fighter...
RIYADH: A tripartite agreement among the National Handicraft Program, Prisons Department and the Technical and Vocational Training Corp. (TVTC) was recently signed in the presence of Prince Sultan bin Salman, president of the Saudi Commission for Tou...
JEDDAH: British authorities have opened investigations into the plane crash that led to the death of three members of the Binladin family.Investigations depend on the black box which registers the entire plane’s data, including speed, position of mob...
JAZAN: In a tragic accident, a speeding fuel truck caused four deaths and injuries to many people when it collided head on with five cars on the northern entrance of Abu Areesh area of Jazan, according to a website.The truck deviated from its path an...
JEDDAH: Municipal and Rural Affairs Minister Abdul Lateef Al-Asheikh has directed all the municipal authorities to closely scrutinize the election candidates’ credentials to thwart violation of rules.This is to ensure that the candidates meet all the...
Mohammed Mokammel Hossain, labor consul, Bangladesh Consulate, Jeddah * Which particular aspect of Saudi Arabia you like the most? Two Holy Mosques in Makkah and Madinah.* Can you tell us your favorite and oft-repeated Arabic word? Insha’Allah. * W...
RIYADH: Expatriates feel Saudi Arabia is a safer place than their home countries despite the fact that the Kingdom is leading a war against the Yemeni rebels and other terror organizations and a couple of suicide attacks in the recent past. Mahmoud T...
RIYADH: The maximum medical policy or contract for visitors is SR100,000, which covers expenses on emergency treatment, maternity charges, traffic accident injuries, dialysis and medical treatment in or outside the Kingdom. Making the above announce...
JEDDAH: The city and its surrounding areas sweltered on Monday, with the maximum temperature rising to 44 degree Celsius and relative humidity being recorded at 85 percent. The weather department has forecast a similar situation in Jeddah on Tuesday....
JEDDAH: A National Academy for Energy in Dammam and a private technical technical college, both exclusively for women, will be opened in the Easter Province.The General Organization of Technical and Vocational Training is in the process of implementi...
AL-AHSA: Masjid Joatha or Joatha Mosque is a center of attraction in Al-Ahsa with many visitors and tourists thronging the place of worship, which was believed to have been built in the seventh year of Hijri (629 AD).The mosque has been restored as p...

Stay Connected

Facebook