After the bailout plans that were handed to Greece and Ireland by ECB, it’s now time to see if Portugal is next in line.
Currently, Portugal’s government bonds (10 years) have a yield of 7.48, which is a 3.42% increase on a Y-2-Y basis, third in its percent rise to Greece and Ireland.
As a comparison the current government bonds yield of Ireland is 9.38%, while only in October the Irish government bonds yield was 6.92%, right before Ireland was asking/receiving the Euro bailout.
According to the Wall street journal, on April 2011 and June 2011 there will be two bonds maturating that Portugal will have to replace. Each of them has 4.2 Billion EUR and 4.9 Billion EUR, respectively. Portugal’s Treasury claimed it will buy back these government bonds and will issue new debt worth EUR750 million to EUR1 billion today, March 9th and to mature on September 2013.
If Portugal will fail to accomplish this task it will have a problem coming April. For now it seems that the market is betting that Portugal won’t succeed as the Credit default swaps continue to rise.
The credit default swaps of Portugal are also on the rise, as its five-year credit default swaps (CDS) increased by 12 basis points to reach 493 basis points. The leader in this category in Europe is Greece with 22 basis point increase on the day to reach 1,005 basis points.
If Portugal will reach default and will need bailout from ECD, this will be another blow for the Euro union.
On Friday, March 11th, is the summit of the EU committee. The summit will be about major economic issues and policies affecting the Euro area, including the bailout funds given to Greece and Ireland (and maybe Portugal might be next in line), and prepare for a full summit of all 27 Euro countries at the end of March.
Up to the summit, reports suggest that ECB halts the bond purchases of Ireland, Portugal and Greece, even though ECB has been intermittently buying Portuguese government bonds.
The implications of this current near-debt crisis that Portugal is currently at, might affect not only the Euro area economy, but also spill over to affect commodities as traders will consider purchasing energy and precious metals to hedge against the additional crisis that Europe might have to face next.
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