1. Introduction

The Portuguese Debt Management Office (IGCP), established in December 1996, is responsible for managing the treasury, the direct debt and the financing of the central government, in compliance with the Debt Framework Law, the State Budget Laws and the guidelines defined by the Government.

IGCP took over these roles from the former Directorate-General of the Public Credit Board and from the part of the Directorate-General of the Treasury previously responsible for the Government funding policy and Treasury management.

The creation of IGCP was an important step in establishing the necessary conditions for the smooth adaptation of the country to the introduction of the Euro (1 January 1999), considering the high degree of financial skills required for an efficient and accurate functioning of the activities of issuing and managing the public debt.

The statutory bodies of the IGCP are the Chairman of the Board of Directors, the Board of Directors, the Advisory Board and the Audit Committee. The Board of Directors comprises the chairman and two executive directors, all of them appointed by the Council of Ministers for three year mandates. The Board is empowered to conduct all duties and to take all actions committed to the IGCP under the terms of the Law. The Audit Committee is responsible for following up and controlling the financial management of IGCP and the Stabilisation Fund of Public Debt, as well as supervising the respective accounting procedures and activities. The activity of IGCP is also subject to supervision by the Audit Court.

The IGCP publishes monthly and annual reports, which are available on demand and on its Web Site (www.igcp.pt).

2. Description of debt instruments

2.1 Marketable debt

2.1.1 Money market instruments

2.1.1.1 Treasury bills

BTs are short-term securities with a face value of one euro, which can be issued with maturities of up to one year. They are issued at discount and placed via auction or limited subscription offer and redeemable on maturity at nominal value.

2.1.1.2 Euro-commercial papers

ECP consists in the issuance of tradable instruments on non-regulated markets, issued at discount and with maturities between one week and one year. The maximum outstanding of this instrument is limited to EUR 4 billion or equivalent and the programme allows the issuance of securities in EUR and other currencies.

2.1.1.3 Other

None.

2.1.2 Bonds

Treasury Bonds

Standard medium- and long-term book-entry securities issued by syndication, auction or by tap with:

• maturities of between 1 and 50 years;
• bearing a fixed interest rate coupon or zero coupon;
• redeemable on maturity at nominal value; and
• with the possibility of stripping.

Euro Medium Term Notes Programme

The Programme allows for Notes to be admitted to listing on the official list and to trading on the regulated market of the Luxembourg Stock Exchange. The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system or to be admitted to listing, trading and/or quotation by such other or further competent authorities, stock exchanges and/or quotation systems as may be agreed with the Issuer. Notes may be denominated in any currency or currencies, subject to compliance with all applicable legal and/or regulatory and/or central bank requirements. Any maturity is permitted subject, in relation to specific currencies, to compliance with all applicable legal and/or regulatory and/or central bank requirements. Notes may be interest-bearing or non-interest bearing.

Other bonds

Includes other bonds (both in domestic and foreign-currency) issued before 2003. The weight of these bonds in the total marketable debt is now negligible (less than 0.2%).

2.1.2.1 Fixed rate income instruments

Includes OT, MTN and Other bonds bearing a fixed interest rate.

2.1.2.1.1 Short-term bonds

None.

2.1.2.1.2 Medium-term bonds

Currently, there are outstanding bonds with initial maturity of 5 years.

2.1.2.1.3 Long-term bonds

Currently, there are outstanding bonds with initial maturity of 10, 15 and 30 years.

2.1.2.2 Index-linked bonds

None.

2.1.2.3 Variable-rate notes

Includes MTN and Other bonds bearing a floating interest rate.

2.1.2.4 Other

Retail bonds - perpetual bonds with a fixed rate issued in the domestic market in the 1940s. The weight of these bonds in the total marketable debt is negligible (less than 0.1%).

2.2 Non-marketable debt

2.2.1 Savings bonds

The savings instruments are issued with the objective of capturing households' savings. Their main feature is the fact that they are retail distributed, that is, they are issued directly to single investors and they have small minimum subscription amounts. These instruments can only be subscribed by households; they are non-tradable and may only be transferred due to the death of the owner.

It includes two types of instruments: Saving Certificates and Treasury Certificates. The main characteristics are as follows:

Saving Certificates (C series is the current available series for subscription):

• 10 year maturity with the possibility of an early redemption after the first 3 months at the subscriber's request;
• Floating interest rate payable on a quarterly basis;
• Automatic capitalization of the accrued interest (net of income tax).

Treasury Certificates:

• 10 year maturity with the possibility of an early redemption after the first 6 months at the subscriber's request;
• Fixed interest rate payable on an annual basis.

2.2.2 Other

Repo  

The Republic of Portugal also operates in the repo market, as part of the integrated management of public debt and central treasury. Bonds and T-bills for repo are issued on demand and are canceled at the maturity of the trade.

Credit facilities

As an additional instrument of cash management, IGCP has in place several non-committed credit line facilities with Primary Dealers.

Cedic

Special Saving Certificates that represent internal loans of the Portuguese Republic with maturities up to 18 months. All entities compliant with the principle of centralized cash management, including general government and other government related institutions, can use excessive cash balances to subscribe these instruments.

Other non-tradable perpetual retail bonds and promissory notes

These instruments are also included in this residual category.

3. Selling techniques

Auctions: issues of the main negotiable domestic market instruments, fixed rate Treasury bonds, and Treasury Bills.

Syndicated issues: this selling technique has consistently been used on the issue of new benchmark Treasury Bonds, subsequently increased through auctions.

Direct negotiation: issues under the Euro Medium-Term Notes Programme, Euro-Commercial Paper Programme, other non-tradable instruments, and also legally possible for the main tradable instruments (BT and OT, even if it has never been used).

Continuous issues (on demand): Savings and Treasury Certificates are issued at the IGCP and Post Office counters.

4. Other information

4.1 Valuation of debt instruments

The central government debt is expressed at nominal value and in millions of euro. The debt denominated in other currencies is converted into euro according to the exchange rate of the last working day of the month to which the data are attributed.

All data are presented on a public accounting basis and are recorded on a cash basis (e.g. each flow is registered in the public accounts when the payment or receiving effectively occurs).

4.2 Fiscal year

Calendar year.

4.3 Estimates

The information available is based on administrative records, which are, in turn, based on exhaustive record of operations.

4.4 Maturity structure

Initial maturity.

4.5 Duration

Duration and average term to maturity are calculated for the total outstanding debt including swaps and other derivatives. It does not include securities issued to FRDP - Public Debt Regularization Fund - in order to conduct operations to promote liquidity in the secondary market, as well as to intervene in financial derivatives operations imposed by an efficient management of public debt. 

[1] See Decree-Law No. 280, of 17 September 1998