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Portuguese bank Caixa Geral de Depósitos is in London to roadshow a subordinated bond this week, in what marks a major return to capital markets for the country’s financial sector following a troubled 2016.

CGD, which is still owned by the Portuguese state, is selling a €500m additional tier 1 (AT1) bond – the riskiest form of financial debt.

The sale, if successful, is expected to price later this week and will come alongside an injection of €2.5bn in capital into the bank from the government.

The new bond comes over a year after a furore surrounding losses on Novo Banco debt, in which senior creditors saw their holdings written down, and a group of investors including BlackRock and Pimco took legal action.

The successful issuance of a subordinated bond would mark a turning point in the Portuguese banking sector’s relationship with international investors. Since the Novo Banco incident, the markets for bank capital have been effectively closed to Portuguese lenders.

The CGD roadshow attracted a “full house” of investors, according to one strategist, who suggested they were willing to look past the Novo Banco incident.

The move comes as investor demand for higher yielding, riskier bank bonds in peripheral Europe has skyrocketed. Earlier this month, Bankia, the state-owned Spanish bank, attracted nearly €5bn of demand for a €500m bond.

The overall market for AT1 bonds, which collapsed early last year in part because of the Novo Banco losses, has rallied significantly this year and provided investors with major gains.

Banks sell a range of debt securities to meet capital requirements and shore up their balance sheets, ensuring investors can absorb losses at times of distress.

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