Yields fall sharply in Portuguese debt auction

LISBON, Portugal (AP) -- Portugal's chances of ending its three-year bailout program without requiring more help have increased after interest rates fell steeply in a 10-year bond auction Wednesday.

The government debt agency said it raised 750 million euros ($1 billion) in the sale at an affordable rate of 3.575 percent. That is down from 5.1 percent in February and the lowest in eight years. Demand was for more than three times the amount on sale.

Prime Minister Pedro Passos Coelho said the auction result "gives us a lot of confidence for the future."

Portugal needed a 78 billion euro bailout in 2011 when, like Greece and Ireland previously, it was engulfed by the eurozone debt crisis and investors grew reluctant to lend it money, pushing the country close to bankruptcy.

The debt crisis has abated recently as Portugal has slashed spending to correct its budget deficit which stood at 4.9 percent of the country's annual gross domestic product last year. In 2010 it was 10.1 percent.

The three main international ratings agencies still classify Portuguese bonds as junk, however, and the government has vowed to continue its unpopular austerity measures.

The bailout program is due to end May 17. The prime minister said the government will say by May 5 whether it needs a precautionary credit line form its European partners after that, but most analysts believe Portugal will stand alone and raise money on financial markets. Ireland also ended its bailout program in December without asking for more help.

"Investor demand (for Portuguese debt) remains high," said Filipe Silva, debt manager of Lisbon-based financial group Banco Carregosa. "The risk perception associated with Portugal keeps going down."