IGCP Sells EUR 1.28 Billion in Wednesday Debt Sale — Ceasefire Rally Shaves 20 Basis Points Off Yields Overnight

Portugal's treasury agency IGCP raised EUR 1.278 billion in a double bond auction on Wednesday morning, selling 10-year and 14-year government debt under dramatically different market conditions than had been expected just hours earlier.

The auction — covering the OT 3.25% June 2036 line (10-year) and the OT 3.375% June 2040 line (14-year) — had been set against the backdrop of the most expensive sovereign borrowing environment in over a decade. On Tuesday, yields on Portugal's 10-year bonds had climbed above 3.5% in secondary market trading, pushed higher by the oil price shock triggered by the escalation of the US-Iran conflict in the Strait of Hormuz.

Overnight Reversal

But the picture shifted abruptly in the early hours of Wednesday when US President Donald Trump announced a two-week ceasefire with Iran, including a suspension of bombardments. The announcement sent oil prices plunging below USD 100 per barrel and triggered a rally in European government bonds — with Portuguese 10-year yields falling by 20 basis points to around 3.3%, the sharpest single-day drop since February 2023.

That relief arrived just in time for the IGCP's auction window.

The Numbers

In the 10-year tranche, Portugal sold EUR 745 million at a yield of 3.304%, with demand running at 1.8 times the amount offered. While lower than the 3.5%-plus levels seen the previous day, the rate was still 16.2 basis points above the last comparable auction in February, when the treasury paid 3.142%.

In the 14-year segment, Portugal placed EUR 533 million at a yield of 3.61%, with a bid-to-cover ratio of 1.56. The last comparable 14-year operation, held in May 2024, priced at 3.297% — meaning Wednesday's cost was 31.3 basis points higher.

Still More Expensive Than Before

Despite the overnight relief, the auction confirmed what analysts have been warning for weeks: the era of cheap government borrowing is over, at least for now. The combination of war-driven inflation expectations, the European Central Bank's cautious stance, and a repricing of sovereign risk across the eurozone has pushed borrowing costs structurally higher.

Filipe Silva, head of investments at Banco Carregosa, said the results reflected “market expectations regarding the future trajectory of interest rates, in a framework marked by geopolitical tensions arising from the conflict with Iran.”

Across the eurozone, the trend has been uniform. German 10-year Bund yields have risen from 2.65% to near 3.1% since late February. French yields have climbed by more than 57 basis points. Spain's 10-year bonds are trading at 3.58% and Italy's at 3.99%.

What It Means

For Portugal's public finances, higher borrowing costs translate into a growing interest bill on new debt issuance. The IGCP's 2026 funding programme calls for gross issuance of around EUR 16 billion, and every basis point increase adds to the cost of rolling over maturing obligations.

The ceasefire may have taken the edge off this particular auction, but with Brent crude still trading above pre-conflict levels and the geopolitical outlook far from settled, the reprieve may prove temporary. The next scheduled IGCP auction is expected in mid-April.