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UPDATE 1-Portugal redeems bonds as scheduled

Published 04/15/2011, 06:26 AM
Updated 04/15/2011, 06:28 AM

* Next bond redemption in June to require bailout loans

* Bond yields at new record highs

(Adds quotes, bond yields, analyst)

LISBON, April 15 (Reuters) - Portugal repaid around 4.2 billion euros ($6 billion) in maturing bonds on Friday as scheduled, a finance ministry spokeswoman said as the country sought an EU/IMF bailout to cover future financing needs.

Even so, the cost of insuring Portuguese debt against default rose a further 13 basis points on Friday to 603 basis points, meaning it costs 603,000 euros to insure 10 million euros, according to financial information service Markit.

Portugal has another 4.9 billion euros in bonds maturing on June 15.

The country is negotiating bailout terms with the European Union and the International Monetary Fund after requesting financial aid last week. Finance Minister Fernando Teixeira dos Santos has said the country will need the bailout loans to cover its financing needs from June onwards.

"We've always said that we have the conditions to meet our obligations. We made the repayment today as scheduled," the spokeswoman said.

Nevertheless, the yield investors demand on Portuguese debt hit new euro lifetime highs on Friday, with the benchmark 10-year bond yielding over 9.26 percent, up from Thursday's settlement of 9.15 percent. Five-year bonds yielded as much as 10.7 percent.

Recent talk of a possible Greek debt restructuring has pushed up yields on the bonds of other weak euro zone economies. Portugal is the third euro zone country to request aid after Greece and Ireland.

"The rise in long-term yields is natural with this issue of Greek restructuring, since nobody knows what's going to happen," said Filipe Silva, debt manager at Banco Carregosa, adding though that Portugal's shorter-term debt, to be covered by bailout loans, could be a good buying opportunity.

Portugal hopes the bailout deal will be finalised by mid-May.

Next Wednesday, the country will offer up to 1 billion euros in 3- and 6-month treasury bills. (Reporting by Sergio Goncalves, writing by Andrei Khalip; Editing by Ruth Pitchford)

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