Portugal's government bond yields fell towards a six-week low on Friday, after its prime minister said he had no doubt that rating agency DBRS would maintain the investment-grade rank the country needs to qualify for the ECB's asset purchase scheme.
The Canadian ratings firm - the only one of the big four agencies that rates Portugal at investment grade - is due to present its review after markets close on Friday. Analysts said that as regulation dictates that Portugal must be informed of the results a day before, the comments by Antonio Costa were seen as a strong hint that Lisbon would keep the key rating. European Central Bank President Mario Draghi confirmed on Thursday that if Portugal were downgraded it would fall out of the quantitative easing programme. If Lisbon, as some expect, announces a bond auction for next week on Friday, that would be another strong hint that the country has avoided a cut. Investor angst over the decision has receded in recent weeks anyway, with the promise of budget deficit cuts in 2017 and renewed promises of left-wing support for Portugal's government.
Portugal's 10-year bond yield fell 4 basis points to 3.19 percent on Friday, within sight of a six-week low of 3.16 percent struck on Thursday, according to Tradeweb. By 15.40 GMT, it was yielding 3.21 percent, still down 1.4 bps on the day. The German 10-year bond yield - the euro zone benchmark - was flat around the zero percent mark after a brief dip into negative territory earlier in the day.