Portugal auctioned 750 million euros ($1.04 billion) in 10-year bonds on Wednesday at an average yield of 3.58 percent in its first auction since April 2011 as a full exit of its bailout program approaches.
The country's borrowing costs dipped in the run-up to the auction with the benchmark 10-year bond yields falling to an eight-year low last week. They fell further following the auction, with the 10-year paper yielding 3.636 percent on Wednesday.
The auction comes as Portugal's lenders, the International Monetary fund (IMF), the European Union and the European Central Bank have started to review the nation's performance under bailout for the last time, as the country prepares to exit its rescue program in May.
Portugal's debt agency IGCP planned to sell between 500 million euros and 750 million euros of February 2024 bonds. The yield fetched at auction was the lowest on record for a 10-year issue.
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Craig Vesey, head of fixed income at Sanlam private investments said he is not a buyer of Portuguese bonds at current levels as yields have come off significantly while the fundamental picture has remained the same.
"I just don't think they are as attractive as what they were in terms of the valuation. If we go back even just three or four months ago, yields were significantly higher," Vesey told CNBC.
"Greece or Portugal - those kinds of bonds would have been an attractive buy when they had a yield handle on them of 7 or 8 percent for exactly the same kind of fundamental situation from our perspective," he said.
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Portugal's return to the long term bond market follows that of Greece, which managed to attract 20 billion euros ($27.7 billion) of offers for a new five-year bond and is set to sell 3 billion euros at a yield of 4.95 percent.
Bond investors heralded the offer as an important milestone and further boost for the euro zone recovery, with the sub-5 percent yield a significant psychological marker.