Portugal to raise bond issue up to €1.25bn

The auction will be closely watched as an indication of investor confidence as markets keep a close eye on how easily, or not, debt-hit Portugal can raise funds.

Yields or the interest rate Portugal must pay to borrow funds hit a new high for its ten year bonds of 7.3% before falling back to 6.9%. The country is likely to offer very high yields to sell its debt.

Portugal is to offer between €750 million and €1.25 billion.

There has been speculation that Portugal could join Greece and Ireland in requiring an international bail-out, though it has denied rumours.

Investors have become worried over Portugal’s financial health as costs of borrowing continue to rise, however analysts are not worried about the demand for bonds at the auction.

Lisbon has argued that its situation is different from those of Greece and Ireland, both of which have agreed to bail-outs from the European Union and the International Monetary Fund, as its deficit and debt are lower than those nations and that is has not suffered a bubble in property prices and its banks are sound.

The European Commission has said that talks of a bail-out for Portugal have not been initiated.

Greece was the first eurozone country to accept a bail-out of a three-year €110 billion agreement was made.

Last month the Irish Republic accepted a €85 billion bail-out package.