Portugal launches €3.75bn bond exchange Portugal on Wednesday exchanged €3.75bn of government bonds due next year for securities maturing in 2015 as part of an effort to regain access to long-term debt markets. The exchange auction will reduce a €9.7bn bond redemption that falls due in September next year by about 39 per cent to €5.98bn. Analysts have said investors would see the bond exchange as positive if it went above 30 per cent of the outstanding amount and spreads subsequently moved lower. The bond exchange went ahead on the day Lisbon is expected to announce tough new austerity measures as the government seeks to keep the country's €78bn bailout programme on track amid an upsurge in opposition to increased belt-tightening. Filipe Silva, head of public debt trading at Portugal's Banco Carregosa, said the exchange was positive, showing that "investors are interested in increasing their exposure to Portuguese debt." The yield of the 2013 bond fell 35 basis points to 2.71 per cent early on Monday, near its lowest level since the eurozone crisis began to rumble in May 2010. The rally caused by the European Central Bank's promise to intervene in short-term debt markets of embattled euro area countries caused the 2013 bond yield to dip to as low as 2.54 per cent in early September. However, the yield of the bond that matures in 2015 edged up slightly in extremely thin trading. Most international investors have left the Portuguese debt market, with most now held by domestic banks, insurance companies and pension funds, leading to sparse trading. In the operation, the IGCP, Portugal's state debt agency, offered to exchange bonds maturing in September 2013 with a coupon of 5.45 per cent for bonds maturing in October 2015 with a coupon of 3.35 per cent. The September 2013 redemption will the first Portugal has to meet without relying on funds supplied by the European Union and the International Monetary Fund as part of a €78bn bailout agreement. The three-year adjustment programme is scheduled to end in mid-2014, although some European officials have acknowledged privately that it may have to be extended by another year. Under the programme, Portugal is scheduled to regain access to government bond market access by September next year. Lisbon had already prepared for this by extending the maturities of Treasury bills in recent auctions. "We were never of the view that this is a binary thing, where you go from zero to full bond market access overnight," Abebe Selassie, head of the IMF mission to Portugal, told the Financial Times in September. This is a more gradual process. The work is going to continue and we see it proceeding very well. Other plans to sound out the market announced by the IGCP and the IMF include issuing medium-term notes with maturities of one to five years, targeted at specific creditors. Vítor Gaspar, finance minister, has scheduled an announcement for later on Wednesday in which he is expected to detail new tax increases and other measures to replace a planned "fiscal devaluation" involving deep pay cuts, which the government withdrew following mass protests. Portugal's unexpected backlash against austerity, which broke a previously solid mainstream consensus in support of deficit-reduction measures, has highlighted the political difficulties facing eurozone governments struggling to implement increasingly tough fiscal reforms.