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Portugal Needs The European Central Bank Again

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I see that according to the Financial Times that the European Central Bank is supporting the Portuguese government bond market after a surge in yields on it today. From the Financial Times Alphaville section.

Return of the ECB bond purchases…

After a two-week hiatus, the European Central Bank is back; reportedly intervening to buy up Portugese bonds on Thursday after yields on the Club Med debt surged.


how long before the International Monetary Fund is called in?

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The yields on Portugal’s’ bonds are breaking records, above 7.5%. This can be “blamed” on the European Central Bank, that didn’t buy any bonds in the past two weeks. Without the support of Jean-Claude Trichet, money becomes very expensive for Portugal. The high lending levels are unsustainable in the long run, and may force an intervention.

At the beginning of the year, there were talks about a bailout for Portugal – a Franco-German effort to convince Portugal to take the bailout in order to save Spain from the same fate.


Update: Well, the ECB woke up and returned to buying bonds – yields fell from a peak of 7.63% to 7.43% at the moment.

The entire financial system is on life support of central bank intervention. They are trying everything to avoid a collapse.

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