Here’s How Portugal Delayed Its Debt Payments

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Portugal has managed to roll over a substantial number of bond payments that were to be due in the next couple of years, the Wall Street Journal reports. In all, over 6.5 billion euros worth of bonds will have their due dates pushed back. Instead of maturing in years such as 2014 or 2015, the bonds are now set to mature in years such as 2018, giving the Portuguese government more time to pay back the loans.

The step is just the latest measure that the Portuguese government has taken in order to ensure that it does not need additional bailout funds from international organizations such as the European Central Bank or the International Monetary Fund. The current round of funding is set to dry up next year, putting the country in a financial squeeze. With past bonds having their maturity date pushed back, Portugal will have less to worry about as obligations have already backed the country into a corner. The country is facing a need of some 50 billion euros in financing next year, with austerity measures and borrowing the two most likely options for raising the money.

The move isn’t entirely bad news for bondholders, who will get increased interest rates in exchange for the later maturity dates. A bond that would mature in 2015 carried an interest rate of about 3.2 percent, whereas a bond that is pushed back to 2018 carries payments of approximately 4.9 percent — a significant jump in basis points.

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