Bailed-out Portugal has lowered the financial hurdle it must clear next year when a hefty debt repayment falls due by exchanging bonds worth €3.76 billion ($4.86 billion) for longer-term bills, The Associated Press reports.

Bonds valued at almost €10 billion are due to mature next September in the first major test of Portugal's financial health since it needed a €78 billion rescue in May last year.

The government debt agency said Wednesday, Oct 3 it swopped 38.5 percent of that debt for bonds maturing in October 2015.

That reduces the debt Portugal will have to cover in September to just under €6 billion, giving it some breathing space as it struggles to restore market confidence.

The Bank of Portugal predicts an economic contraction of 3.3 percent this year. Unemployment is at a record 15.9 percent.