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Eu Paralysis Drives Fresh Bond Rout

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Portugal edged closer to the brink yesterday, having to pay almost 6pc to raise two-year debt. The yield on 10-year bonds briefly surged to 7.8pc after the Chinese rating agency Dagong downgraded the country's debt to BBB+.

"These levels of interest rates are not sustainable over time," said Carlos Costa Pina, secretary of the Portuguese Treasury, blaming the latest upset on the lack of a coherent EU debt strategy rather any failing by Portugal to deliver on austerity.

Mr Costa Pina rebuffed calls by leading economists in Portugal for an EU-IMF bail-out rather than drawing out the agony. "It is not justified. Portugal doesn't need external help, it needs urgent measures by the EU to restore market confidence."


Mar 8, 2011

Greek 10-year bond yields and credit-default swaps surged to a record as borrowing costs increased at a debt sale and before European leaders begin meetings aimed at containing the sovereign debt crisis.

Spanish bonds also slid as the government sold debt through banks. Greek bond losses extended declines to a ninth day after the nation’s credit rating was cut by Moody’s Investors Service yesterday. Portuguese 10-year bonds fell for a second day before a notes auction tomorrow. German 10-year bonds dropped amid speculation the nation’s economic growth will add to pressure on central bankers to increase interest rates.

“There is quite a lot of peripheral supply that needs to be digested and apparently we’re struggling to find more buying interest at these levels,” said Marcel Bross, a fixed-income strategist at Frankfurt-based Commerzbank AG. “We have these important meetings coming up, where we see some potential for disappointment.”

The yield on 10-year Greek bonds jumped as much as 52 basis points to 12.85 percent, the most since Bloomberg began collecting the data in 1988, with the increase in yields the biggest since Oct. 27. It was at 12.84 percent as of 5:04 p.m. in London. The 6.25 percent securities maturing in June 2020 fell 2.04, or 20.4 euros per 1,000-euro ($1,389) face amount, to 65.29.

The Irish bailout has contained the problem. I dread to think how bad this would be if there hadn't been a bailout.

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last week's shock move by the ECB to pre-announce rate rises had tightened credit and effectively doomed the country. "The ECB by its actions has made it inevitable that Portugal will need a bail-out. There are parallels with the actions of the Bundesbank during the ERM crisis in 1992,"

Couldn't agree more. I made the same remark in a previous ECB thread.

Great last call by Axel W (amongst others) before he buggers off to Deutsche Bank: 3 hikes in 2011.

Might DB be long PIIGS CDSs by any chance? :D

Edited by Greener Pastures

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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