Portugal eyes full return to bond markets Portugal's debt agency is confident that the country is poised to regain full access to bond market funding in the next few months and exit its bailout programme, despite its heavy debts and recession-plagued economy. If Portugal is able to fund itself on bond markets without aid from Europe's rescue funds it will provide a big fillip to investor confidence in the ­eurozone. Lisbon succumbed to a €78bn rescue package in May 2011 but renewed confidence that the eurozone will hang together has fuelled a rally in Portuguese bonds over the past year. The 10-year bond yield recently touched 5.74 per cent, the lowest since October 2010 and down from a peak above 17 per cent early last year. As a result, Portuguese debt was one of the best performing assets in the world last year. The rally helped Lisbon in January to return to the bond market for the first time since its bailout and has nurtured optimism that the country is on the verge of being able to repeatedly issue debt. "I expect we will have full market access in the next few months," João Moreira Rato, chief executive and chairman of IGCP, the Portuguese treasury and government debt agency, told the Financial Times. "We are very close to it," he added. It looks like everything is moving in the right direction. Portugal raised €2.4bn last month through a "tap" - increasing the size of an existing bond maturing in 2017 - a strategy it is likely to continue in parallel with bond exchanges. US asset managers, including hedge funds and big Boston mutual funds, have been the biggest buyers of Portuguese bonds over the past half year. "We have been rebuilding our investor base and, as we are not investment grade, we have to look for investors with more flexibility, including US investors," Mr Rato said. Nonetheless, some investors remain cautious on Portugal, citing its recession and weak public finances. Lisbon's upbeat sentiment has been damped this week by worse-than-expected unemployment figures and news that the economy contracted last year even more than projected. According to figures released by the National Statistics Institute on Thursday, the economy shrank by 3.8 per cent in the last quarter of 2012 compared with the same period in 2011, the sharpest quarterly contraction in the EU after Greece. "I wouldn't be surprised if they get access to the markets again but it's too early to say that Portugal has really turned a corner," said Michael Krautzberger, head of European fixed income at BlackRock. "We need to see at least some sustainable economic growth," he added. Right now, the market is inclined to give them the benefit of the doubt but I won't be a huge buyer of any Portuguese bond sales.