Portugal's borrowing costs jump in bond sale

Portugal, which in recent years has generated little wealth and piled up heavy debts, is regarded as one of the most financially vulnerable countries in the 16-nation eurozone.

Portugal's Public Debt Management Agency said it sold 378 million euros in 11-year bonds and 661 million euros in 3-year bonds. However, the average interest yield on the longer bonds was 5.973 percent, up from 5.312 percent on 10-year bonds at an auction last month. The 3-year bond yield was 4.086 percent, up from 3.62 percent in a 4-year bond auction in July.

Portugal's financial difficulties could aggravate international fears about the continent's broader financial problems.

The Wall Street Journal reported that EU stress tests of 91 banks in July understated some of their holdings of potentially risky debt. That fueled market concerns about underlying weaknesses in the bloc and wider fears about the strength of the global economic recovery.

Moody's Investor Service in July downgraded Portuguese bonds to A1 from AA2, citing sluggish growth prospects.

Portugal, along with Spain and Ireland, is widely seen as a potential candidate for a bailout like the one provided to Greece to keep it from defaulting on its debts.

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