Portugal starts the year with 3.7% of new debt. It is the highest level since 2014.


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The country’s funding costs have worsened since last year, with inflation and the central bank’s monetary policy to combat it putting pressure on the entire global debt market.

The cost of issuing new debt by Portugal reached its highest value since 2015 at the beginning of the year. The placement rates have worsened since last year, reaching an average of 3.7% in January, according to data released Wednesday by IGCP – Treasury and Public Debt Management Agency.

The average rate at which Portugal financed itself in the markets is in line with the international trend in the bond market, which is adjusting to escalating inflation and the increase in interest rates by the European Central Bank (ECB).

All in all, new debt cost an average of 1.7% last year. This is an even bigger increase compared to 2021, when Portugal financed itself with an average interest rate of 0.6%, or to the 0.5% registered in 2020 – the lowest ever for the country.

Since 2011, the cost of new debt had been falling, reaching record lows in 2020, thanks to the asset purchase programs of the monetary authority led by Christine Lagarde. But by 2020, heavily marked by the pandemic, the cost of debt issued by the country had already begun to rise, a trend that has deepened.

The last time the average interest rate on new debt reached 3.7% was in 2014, at the height of the crisis. The year before, in 2013, it was 4.4%.

Already, the cost of the “stock” of debt – which includes all debt, not just this year’s placements – will fall to 1.9% in 2021, from 2.2% in 2020. Last year’s figures are not yet known.

The deterioration in the primary market comes at a time when we are also seeing a scale of yields in the secondary market related to the reversal of ECB policy. In July, September, October and December of last year, as well as at the beginning of this month, the monetary authority raised the three key interest rates by a total of 300 basis points.

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