Thursday, July 07, 2011

European Financial Crisis: Portugal Update

by Calculated Risk on 7/07/2011 02:09:00 PM

For a classic hockey stick formation, check on the 2 year yields for Portuguese and Irish bonds (table below). For Portugal, the 2 year yield is up to 17.5%, and for Ireland, the yield is 15.6%.

The yields for Italy and Spain are up too, and of special concern is the sharp increase in the Italian 10 year yield up to 5.2%.

From the ECB this morning: ECB announces change in eligibility of debt instruments issued or guaranteed by the Portuguese government

The Governing Council of the European Central Bank (ECB) has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the Portuguese government. This suspension will be maintained until further notice.

The Portuguese government has approved an economic and financial adjustment programme, which has been negotiated with the European Commission, in liaison with the ECB, and the International Monetary Fund. The Governing Council has assessed the programme and considers it to be appropriate. This positive assessment and the strong commitment of the Portuguese government to fully implement the programme are the basis, also from a risk management perspective, for the suspension announced herewith.

The suspension applies to all outstanding and new marketable debt instruments issued or guaranteed by the Portuguese government.
I guess they are tired of the credit agency downgrades.

Here are the links for bond yields for several countries (source: Bloomberg):

Greece2 Year5 Year10 Year
Portugal2 Year5 Year10 Year
Ireland2 Year5 Year10 Year
Spain2 Year5 Year10 Year
Italy2 Year5 Year10 Year
Belgium2 Year5 Year10 Year
France2 Year5 Year10 Year
Germany2 Year5 Year10 Year