"Demand was very significant," Finance Minister Maria Luis Albuquerque told journalists after a weekly cabinet meeting on Thursday. "This was a very successful issue."
The five-year bond issue had reached the government's goal of 3.25 billion euros (2.6 billion pounds), she said, which is almost one-third of the 10.5 billion euros in bond issuance envisaged by the government's 2014 budget. The final yield was 4.657 percent.
In the secondary market, the June 2019 bond yielded around 4.7 percent, well below the 6.4 percent in Portugal's last pre-bailout bond issue in 2011 and below last January's 4.89 percent on a slightly shorter maturity.
Portugal wants to demonstrate to investors that it can issue bonds to ensure a smooth exit from its 78-billion-euro bailout as planned in mid-2014. Sharply falling yields and growing optimism in markets that the worst is over in the euro zone crisis is helping Lisbon approach that goal.
Nicholas Spiro, managing director at Spiro Sovereign Strategy, said Portugal was reaping the benefits of sharply improving market sentiment.
"Portugal is now building up a cash cushion like Ireland did last year," he said. "There is a window of opportunity for Portugal to issue bonds that doesn't seem to be closing quickly."
Still, Spiro doubts Portugal will manage to exit its bailout without some sort of precautionary lending programme from creditors to replace it, unlike Ireland which made a 'clean exit' from its assistance plan.
"The overriding goal is to get their debt out the door to build a cash cushion to have leverage. This is a politically driven funding programme," he said.
In another positive development, the government announced the winner of a privatisation tender for Caixa Seguros, the insurance unit of the state-owned bank Caixa Geral de Depositos. The sale to Chinese group Fosun International will earn the government about 1 billion euros.
That means Lisbon has earned a total of 8.1 billion euros from privatisations since the start of the bailout, beating its privatisation revenue goal of around 5 billion euros.
Portugal's stock index PSI20 <.PSI20> rose to its highest levels since mid-2011 earlier on Thursday on optimism about the debt market return.
(Reporting By Axel Bugge and Sergio Goncalves; editing by Matthias Williams)