slide1 n.
Skip this Video
Loading SlideShow in 5 Seconds..
June 2008 PowerPoint Presentation
Download Presentation
June 2008

Loading in 2 Seconds...

play fullscreen
1 / 23

June 2008 - PowerPoint PPT Presentation

  • Uploaded on

Republic of Portugal. The new OT 2023. The Next Step in the Development of the OT Benchmark Curve. June 2008. CONTENTS:. Section 1: New issue summary Section 2: Portugal’s Public Finance Reform Programme Section 3: Debt management and funding. OT issuance in 2008.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'June 2008' - sahara

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

Republic of Portugal

The new OT 2023

The Next Step

in the Development of the OT Benchmark Curve

June 2008



  • Section 1: New issue summary
  • Section 2: Portugal’s Public Finance Reform Programme
  • Section 3: Debt management and funding

OT issuance in 2008

  • € 10 - 12 billion(gross) to be issued throughgovernment bonds (OT)
    • Two new benchmarks to be launched through syndication
      • 10yr benchmark already launched in February – OT Jun 2018
    • Reopening of OT previously issued
    • € 4.5 billion (gross) already issued

THE NEXT STEP:The new OT October 2023

OT/PGB yield curve

A new OT Oct 2023


The new benchmark OT 2023

Issue Details

OT October 25, 2023

Issuer: Republic of Portugal


Initial size:EUR 3 billion

Launch and pricing:TBC

Start of book building:TBC

Maturity:October 25, 2023 (long first)

Joint-Lead Managers:CaixaBI, Citi, HSBC, Lehman Brothers, Morgan Stanley

Co-Leads:ABN-AMRO, Barclays, BES, BNP Paribas, BSCH, Calyon, HVB, Deutsche Bank, Goldman Sachs, ING, SG CIB

  • A new Euro benchmark bond to further complete Portugal’s maturity curve and to provide liquidity for investors
  • To reach a final size no lower than EUR 6 billion giving enhanced liquidity to the OT yield curve
  • Under market-making obligations on MTS Portugal and EuroMTS
  • To be admitted as a benchmark issue by Tradeweb and Bondvision




  • Section 1: New issue summary
  • Section 2: Portugal’s Public Finance Reform Programme
  • Section 3: Debt management and funding

Portuguese public finance reform programme

  • A stable political and social environment
  • The two main political parties have the backing of roughly 80% of the Portuguese voters and share the objective of budgetary consolidation
  • A government with absolute majority in the Parliament since February 2005
  • A new President of the Republic was elected in January 2006
  • There will be no elections until 2009 for Central and Local Government and 2011 for the Presidency
  • A high degree of social consensus

Portugal’s public finance reform programme

  • The Portuguese government has astrong mandate toput public finances on a sustainable footing
  • The Stability and Growth Programme (SGP), 2007 - 2011 (December 2007) includesa comprehensive set of measures consistent with a correction of the prevailing deficit and a progress towards the medium-term objective, includingthe following:
    • Central Government restructuring
    • Reform of the social security and health systems
    • Improvement in the use of public resources
    • Strengthen the tax system’s effectiveness
  • 2008 Budget Law approved by the Parliament reaffirms the Government’s commitmentsand objectives included in the SGP

The Stability and Growth Programme

  • Public finances in the medium-term: SGP 2007-2011
  • Government committed to reduce budget deficit over the coming years
  • Deficit reduction based on structural measures rather than on one-off and temporary measures
  • Between 2005 and 2007 the deficit was reduced from 6.1% to 2.6% of GDP
  • In 2008 the deficit is expected to achieve 2.2% of GDP

The Stability and Growth Programme

  • Public finances in the medium-term: SGP 2007-2011
  • The performance in 2007 allowed the Government to attain the Stability and Growth Pact’s reference value, one year ahead of schedule
  • “Portugal is to be praised for bringing its deficit to 3%, and possibly less, in 2007, one year before the deadline. The recent pension reforms also significantly improve the long-term outlook of its finances. It is encouraged to pursue its budgetary strategy to help put the Portuguese economy back on a sustainable and dynamic catching-up path.” – Recommendation from the EC on February 13th, 2008


portuguese economy on recovery path
Portuguese economy on recovery path

Harmonized CPI

Real GDP growth

Source: National Statistics Office and Budgetary Guidelines Report (May, 2008)

Source: Bank of Portugal

Economic Sentiment Indicator

Monthly Coincident Indicator

Source: Bank of Portugal

Source: Bank of Portugal



Structural reforms…

  • Measures to reduce public expenditure
  • Reforming the Public Administration
  • Reorganisation of the State’s local services (PRACE)
  • Development of shared services
  • Keeping staff costs growth under strict control
  • New rules and guidelines to improve human resources management
  • Promotion of the sustainability of the social security system, through fundamental changes on the applicable rules, in line with major demographic trends

Structural reforms…

  • Measures to reduce public expenditure
  • Improving the use of public resources
  • Streamlining of the fundamental public services (education, healthcare, justice and local Government), including the harmonization of public health protection systems in line with the private sector regime
  • Efficient allocation of public real-estate

… underpinning fiscal consolidation

  • Some measures already implemented to increase tax revenue
  • Fight against tax fraud and evasion and abusive tax planning
  • Use of information as a lever in the fight against fraud and tax evasion shall continue to be stimulated
  • The dissuasive effect resultant from the new debt recovery instruments and mechanisms, and the significant worsening of sanctions for non-compliance with tax obligations, in addition to the revenue achieved, has been the greatest benefit of these actions
  • Reduction of tax benefits and exemptions

Supported by an important privatisation programme

  • At least 80% of the revenues will be used to reduce the outstanding government debt, thus reducing the borrowing needs
  • Expected privatisation revenues






Privatisation revenues







Source: SGP (December, 2007)


Portuguese fiscal foundations

  • Portugal has a lower debt burden than euro area average and better than “core” Europe and other rating peers

General government gross debt - 2007

Source: Eurostat



  • Section 1: New issue summary
  • Section 2: Portuguese Public Finance Reform Programme
  • Section 3: Debt management and funding
a market driven borrowing strategy

The most important driving factor:

The main pillars:

  • Predictability
  • Transparency
  • Accountability


A market driven borrowing strategy
  • Aiming at building up a Portuguese benchmark yield curve
  • Size
  • Tradability – Efficient and standard market conditions

A market oriented borrowing strategy

  • Priority to the development of a government benchmark yield curve

Active debt management -

derivatives and buy-backs

  • Interest rate and refinancing risk management

OT issuance process

  • OT launched through syndication…
  • Building up an international and diversified investor base
  • Benchmark size: € 3 billion
  • Allowing the benchmark OT to be traded in MTS Portugal with quoting obligations from start

…and increased through auctions up to € 6 billion

  • OT syndication process
  • PD are the only underwriters
  • PD committed to place bonds in high quality investors
  • IGCP is the active manager
  • E-book building

An efficient and liquid secondary market

Participants in MEDIP/MTS Portugal

OT secondary market driven by MTS Portugal

ABN Amro Bank

Banco Espírito Santo

Banco Santander Central Hispano

Barclays Bank PLC

Bayerische Hypo-und Vereinsbank, AG

BNP Paribas

Caixa - Banco de Investimento, S.A.


Citigroup Global Markets

Deutsche Bank

Goldman Sachs International

HSBC France


Lehman Brothers International

Morgan Stanley & Co International

Société Générale

Dresdner Bank

Fortis Bank

  • All OT listed in Lisbon on MEDIP/MTS Portugal
  • In parallel quotation with EuroMTS
  • MEDIP/MTS Portugal a regulated “local” market
  • Driven by market-making obligations from Primary Dealers
  • Market-making obligations in line with other MTS platforms
  • Prices spreading over other market segments
  • Trading spreads within a narrow range and similar to market peers
  • Settlement through Euroclear/Clearstream
  • Prices disclosed in real-time to non participants: Reuters PT/MTS1and Bloomberg
  • Daily turnover, reference prices and a daily fixing in

16 OEVT/ Primary Dealers

18 Market Makers

Bank of America Securities Limited



Commerzbank AG

Credit Suisse

JP Morgan Securities

Landesbank B-W

Mitsubishi UFJ Securities Int. plc


Nomura International


12 Market Dealers


An efficient and liquid secondary market

(as of May 29, 2008)

  • 5-year bid-offer spreads
  • 10-year bid-offer spreads
  • 15-year bid-offer spreads
  • 30-year bid-offer spreads

An efficient and liquid secondary market

  • OT Daily average turnover in MTS Portugal and EuroMTS
  • Very liquid wholesale cash and repo segments
  • MTSP OT daily average turnover in
    • 2006 : € 446 million
    • 2007 : € 627 million
    • January-May,23 2008: € 130 million
  • A last resort repo window provided by IGCP to all market makers in MTSP
  • OT Repo Market Daily Average Turnover

Highly internationalised and diversified OT market

  • Around 85% of the turnover* in the OT secondary market is generated by non-domestic investors

*Turnover with final investors reported by PD (excluding intra-PD trading) - 2007


Tel: +351 21 792 33 00

Fax: +351 21 799 37 95

Web site:

Reuters pages: IGCP01

Bloomberg pages: IGCP


Further information on the Portuguese economy can be obtained from:

Further information on the Portuguese secondary market can be obtained from:

Budget Department

National Statistics Office

Banco de Portugal (Central bank)

Reuters pages: PT/MTS1

MTS Portugal:


The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. All opinions and estimates contained in this document are published for the assistance of recipients, but is not to be relied upon as authoritative or taken in substitution for the exercise or judgment by a recipient and, therefore, does not form the basis of any contract or commitment whatsoever. IGCP does not accept any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents.