Portugal wins auction battle but funding war still rages

Portugal raised Eu1.25bn in a crucial auction on Wednesday morning, with average yields falling on its 10 year debt (to 6.719%) but rising on the five year tranche. The result followed the sale of a pair of MTNs last Friday, raising the tantalising prospect of there being more investors looking to snap up decent yields on paper that would mature before any restructuring. But there's little room for euphoria, given that Portugal's ability to stave off a bailout is increasingly dependent on the prospects for other heavily indebted eurozone economies — like Spain and Belgium. Meanwhile, Nederlandse Waterschapsbank made a Eu1bn smash and grab in the euro market on Friday following the EU’s five year game changer last week and ahead of a glut of supply led by KfW this week. With one sovereign issuer having to widen guidance but other deals reported to be building well despite choppy markets, what shape will the market be in as the EFSF finishes listening to pitches from banks hoping to lead its much anticipated inaugural deal later this month? Read EuroWeek on Friday to find out.