Portugal's interest rates have fallen steeply in a short-term debt auction where it borrowed €2 billion.

This suggests that investor concerns about the bailed-out country's fiscal health are abating.

The Treasury and Public Debt Management Agency said it raised €1.291 billion in 18-month bills today, paying a rate of 2.967% compared with 4.537% in the last comparable auction in April.

It said there was market demand for double the amount on offer.

The Treasury also raised €709m in 6-month bills at a rate of 1.7%, down from 2.292% in July and with demand three times higher than the amount offered.

The Treasury had planned to raise up to €1.75 billion in today's placement.

Debt-heavy Portugal needed a €78 billion bailout last year from the IMF and European Commission.