Fitch Upgrade Pushes Portugal Bonds Higher

Investors bid up Portugal’s government debt on Monday, sending yields to their lowest level since 2015, after a crucial rating upgrade by Fitch added to optimism over the country’s strong recovery after a bailout six years ago.

Portugal’s 10-year bond yield fell to 1.768% from a closing level of 1.808% at the end of last week. It has not closed a day at such a low level since April 2015, Reuters data show.

Late on Friday, Fitch upgraded Portugal two notches, taking it out of junk territory and into investment grade. The decision followed an upgrade in September to investment grade by S&P Global and will mean that Portugal’s bonds will qualify for inclusion into major bond indices for the first time in six years.

Portugal was one of the economies that was hit worst by the eurozone debt crisis that began in 2011. Its jobless rate had surged to almost 18% by 2013, according to figures from Eurostat, the eurozone’s statistical agency.

It received a €78 billion ($92 billion) international bailout in 2011, and the yield on its 10-year bond reached a peak of 17.35% a year later. But a recovery has taken hold over the past two years as Portugal’s socialist government has looked to tackle unemployment, repair its public finances and bolster its banking sector. The unemployment rate clocked in at 8.6% in October.

“The Portuguese economy has experienced a strong cyclical recovery since mid-2016 and the short term outlook has also improved,” Fitch said in its report, adding that “strong labor market performance confirms the strength of the recovery.”