Source: Neno’s Place – A Community of Reality
URL: http://www.nenosplace.com/showthread.php?54653-Portuguese-bond-yields-climb-on-default-fears&goto=newpost
Portuguese bond yields climb on default fears
By David Oakley and Richard Milne
http://www.ft.com/intl/cms/s/0/efd50…#axzz1nocq4xyT
Portugal’s cost of borrowing leapt on Wednesday because of growing worries that the country will follow Greece and head towards a possible default on its debt.
Portuguese 10-year bond yields jumped to 13.75 per cent, a rise of 73 basis points, after a report from the troika of the European Union, European Central Bank and the International Monetary Fund unsettled the markets.
It suggested to many traders that Lisbon was increasingly likely to need a second bail-out, which in turn pointed to a growing probability that the country would default.
Portuguese yields, which have an inverse relationship with prices, were also hit by uncertainty surrounding pay-outs on Greek credit default swaps, which act as a kind of insurance for investors against default. Greek and Irish yields also rose. Greek 10-year yields jumped 42bp to 34.79 per cent and Irish nine-year yields increased 9bp to 16.59 per cent.
However, Italian and Spanish yields fell, helped by the ECB’s second longer-term refinancing operation, which was considered a success by many market participants. The ECB leant €529.5bn to eurozone banks, slightly higher than market expectations.
The International Swaps and Derivatives Association is due to decide on Thursday on whether a credit event should be triggered on Greece following a question over the de facto seniority given to the European Central Bank over repayments on the country’s debt.
Strategists and traders believe the committee is unlikely to agree to a credit event at this point.
The ECB also holds a significant slice of Portuguese debt, which means private creditors would also rank lower when deciding repayments following any default by Lisbon.
The jump in Portuguese bond yields prompted the ECB to make inquiries over buying the country’s debt, according to traders. These traders said the central bank may have bought a small amount of Portuguese debt. However, the mere suggestion that the ECB is considering purchases could help to arrest a rise in yields, they say.
The troika’s third review of Portugal’s economic programme following its first bail-out last year, which was published on Tuesday, said: “Provided the authorities persevere with strict programme implementation, the euro area member states have declared they stand ready to support Portugal until market access is regained.”
This was the section of the report that sparked worries over a second bail-out and default, said traders.
Standard & Poor’s and Fitch have both put Greece on temporary default. They will rate Greece again once a debt exchange with private investors, which will lead to losses of about 75 per cent on bonds, is concluded.
A request for a Greek credit event, or pay-out, was made to the determinations committee of Isda on Wednesday. Strategists and traders believe the committee is unlikely to agree to a credit event at this point, although they expect one to be triggered once Greece activates so-called “collective action clauses” on private investors as it will force them to accept the terms of the debt exchange.
The European Investment Bank has followed the ECB in gaining de facto seniority in Greek bonds, according to bankers.
oh what a week I’m having….. 
. . Speaker of the house of the Iraqi parliament – – – A source in Najafi office said in a statement to NINA today : ” Najafi will participate in the conference to be held in Kuwait on the fourth of next month . . . Thats Sunday . . Foreign minister is in Kuwait organizing ahead of Maliki . . Thats today . .
TODAY’S NEWS & THE GURU’S!!
He needs to go or at least have his position compromised in some way. Time will tell if it hinders us from here forward. Poppy3
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