Yet more rape and pillaging of US taxpayers as Portugal now plans to join the long and exalted list of nearly bankrupt countries who wish to join the dollar devaluation bandwagon, and issue debt denominated in dollars. The P in PIIGS is in the same position as the US, needing to plug a massive budget deficit, so it has decided to do what the US does so well - issue bonds with a $ sign on them. Bloomberg reports: "Portugal is selling bonds in
dollars for the first time since November as part of a plan to
issue 25 percent more debt this year to fund its budget deficit. The nation is marketing $1 billion of five-year bonds that
may be priced to yield about 100 basis points more than the
benchmark mid-swap rate." And this is merely the beginning: as most European countries are convinced the pain in Spain is nothing compared to what Washington is about to experience, we expect to see many more deficit whores attempting to jump on the dollar collapse bandwagon.
“It’s not surprising that Portugal is coming to the market
now as many European sovereigns tend to borrow more in the first
half of the year,” said Ciaran O’Hagan, a fixed-income
strategist at Societe Generale SA in Paris. “Portugal will
likely achieve a better rate of funding in dollars so both the
government and taxpayers are getting a better deal.”
The proposed spread on the new bond issue gives an overall
yield of 3.59 percent, according to data compiled by Bloomberg.
That compares with the 3.32 percent yield offered by Portugal’s
benchmark five-year issue in euros.
By issuing in dollars, European governments can reduce the
cost of euro-denominated interest payments, as measured by the
five-year euro basis swap. The basis swap is at 20 basis points
less than the euro interbank offered rate, compared with 15
basis points less than Euribor in January, according to
Relative funding costs compared with a euro-denominated
bond sale were “favorable,” said Alberto Soares, chairman of
Portugal’s government debt agency in Lisbon.
“It’s been our plan to issue foreign-currency bonds, and
it’s just a matter of identifying the window of opportunity,”
Soares said. “We may consider issuing bonds in other
currencies, but there’s no concrete plan on that for now.”
And so much for the lock out of Goldman Sachs from European bond issuance:
Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings
Plc and Morgan Stanley are managing the sale of bonds, the
banker familiar with the terms said.