Thursday 21 November 2019

Portuguese yields spike as markets bet on bailout need

Jim Silver and Anabela Reis

PORTUGAL doesn't need a rescue, Prime Minister Jose Socrates said in Brussels, seeking to counter speculation of a bailout as talks began in Lisbon to end the political limbo after lawmakers rejected his budget cuts.

Portuguese bonds fell, driving their yield to a euro-era record as investors anticipated the country would follow Ireland and Greece in seeking a financial lifeline. A bailout may total as much as €70bn.

"If Portugal were to fall, that would mean other countries and other situations would be exposed with more risk, supporting 'the domino theory', in which one goes after the other," Mr Socrates said after a European Union summit in Brussels, where he arrived one day after offering to resign in the wake of the parliamentary defeat. "This has to stop and Portugal doesn't need a bailout," he added.

The political deadlock comes as downgrades to Portugal's credit rating threatened to deepen its debt woes. Standard & Poor's and Fitch Ratings both cut Portugal's rating yesterday.

"Portugal needs to pay what it owes; it needs to clean up its finances," said Paulo Portas, head of the People's Party, a self-described right-wing group.

Portugal's 10-year yield advanced as much as 14 basis points to 7.8pc. The difference in yield that investors demand to hold the securities instead of German bunds widened 10 basis points to 451 basis points, the most since November.


The Portuguese two-year yield increased as much as 38 basis points to 7.09pc.

Irish bond yields rose again yesterday, continuing the spike that began prior to this week's EU summit. The country's 10-year bond yield hit a record 9.92pc, while debt maturing in two years' time fell back to 9.33pc after passing 10pc earlier in the week.

A deal on debt relief for Ireland has been delayed pending the results of bank stress tests due next week. (© Bloomberg)

Irish Independent

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