Portugal will seek to sell up to 1.5 billion euros of bonds at an extraordinary auction on Friday, testing investor appetite for its debt after its president on Thursday called a snap election for early June.
Revised budget figures for last year have added to Lisbon's woes as it seeks to avoid taking an international bailout and it has 9 billion worth of debt repayments due in April and June that investors speculate may push state finances over the edge.
The country's debt agency IGCP called Friday's tender on Thursday, saying there was specific demand for its June 2012 bonds -- a suggestion it had already lined up buyers for the sale.
Bond yields spiked to new record highs on Thursday on the back of figures showing the 2010 budget deficit was more than a percentage point higher than the 7.3 percent of GDP targeted by the government.
Secondary market yield for the June 2012 bond was at 7.1 percent on Friday, little changed from Thursday, but way above 4.33 percent paid in mid-March to place 12-month T-bills, which is the closest comparable maturity. In the last auction of June 2012 bonds in July 2010, they yielded 3.159 percent.
Prime Minister Jose Socrates, who now heads a caretaker government, has resisted asking for an international bailout after Greece and Ireland, but his resignation last week after parliament rejected budget austerity threw the country into political crisis and prompted downgrades by rating agencies.
Portugal has to redeem 4.2 billion euros of bonds on April 15 and 4.9 billion euros in June, with many economists saying that while the country has probably raised enough funds for the first redemption it would have to tap markets under difficult conditions to meet other needs and the second repayment.
The IGCP said the auction would be held at 9.15 a.m. (0815 GMT). The results normally come out about 20 minutes later.
The premium investors demand to hold Portuguese benchmark 10-year bonds was practically unchanged at 535 basis points on Friday after Thursday's euro lifetime record highs.
(Reporting by Andrei Khalip; editing by Patrick Graham)