LISBON, Jan 12 (Reuters) - Portugal has raised 3 billion euros ($3.42 billion) through a new 20-year bond on Wednesday with solid demand from international investors despite an unstable political situation as the country heads for a snap election on Jan. 30.
Demand reached 20 billion euros, or 6.7 times the amount of the bond on offer, which expires in April 2042, the finance ministry said in a statement.
It said the interest rate was set at 1.185% with the spread for German Bunds "at historic lows", despite the progressive normalisation of the European Central Bank's monetary policy, which led to a recent rise in debt yields in Europe.
"Today's issuance proves the confidence that investors have in Portugal, showing a full access to financial markets under historically favourable conditions," it said, describing the deal as a "success".
Portugal is three weeks away from a snap election, which was called after the two former allies of the ruling Socialists, the Communists and the Left Bloc, sided with right-wing parties to reject the minority government's budget bill.
Political analysts say the election alone might not solve the political impasse as no party or workable alliance is likely to achieve a stable majority, potentially undermining the country's ability to spur growth using European COVID-19 recovery funds.
Portugal expects to issue a total of up to 17.7 billion euros of government bonds this year.
The government remains in full power and projects a further rebound from the 2020's pandemic-induced recession, and signalled a deficit "slightly below" its target of 4.3% GDP in 2021 compared with 5.8% a year earlier.
Portugal, which needed an international bailout amid a debt crisis in 2011, is one of the euro zone's most indebted countries.
Its public debt hit a record of nearly 135% of GDP in 2020. The government estimates it dropped to 126.9% last year. ($1 = 0.8775 euro) (Reporting by Sergio Goncalves and Yoruk Bahceli; Editing by Catarina Demony and Jonathan Oatis)
