Portugal becomes the focus after Ireland bailout

cogito

The Portuguese have got their money but they're paying an awful lot for it. 5.4% for four years, 6.71% for ten. Be interesting to see who bought thye bonds. Doomsday only slightly delayed.

worldtraveller

"Portugal will not request financial aid for the simple reason that it's not necessary", said Mr Socrates.


Yeah, yeah, yeah....:doh:

michaels

Don't the Portuguese banks buy them and then use them as collateral with the ECB against 'real' assets?!

cogito wrote: »

The Portuguese have got their money but they're paying an awful lot for it. 5.4% for four years, 6.71% for ten. Be interesting to see who bought the bonds. Doomsday only slightly delayed.

Dell

They will be bailed out again and again.

The question should be asked is there a limit to how much currency can be added to the worlds supply to pay for all these bailouts?

Mr_Mumble

Bump for today's developments. Portugal's debt yields were at record highs (Portugal, unmoored) so the ECB came in and bought some more bonds (Return of the ECB bond purchases). This is just a creditor bail-out by the backdoor. However, the ECB can't keep buying peripheral debt forever and Portugal can't issue mid/long-dated debt at these levels. Something has to give and the first article suggests the EU summit on 11th March could be when we see fireworks.

worldtraveller

Some European officials are quietly discussing contingencies for what might be a Portuguese request for financial aid as early as next month, when the highly indebted country begins facing large-scale debt redemptions.

Financial pressure on the country's treasury is increasing, a topic that is likely to come up at the March 11 and March 24 meetings of European Union leaders, according to people familiar with the discussions.

"The feeling is that it can't go without a bailout beyond March or April at the latest and is already under pressure by countries like Germany to ask for help, to get it so the situation in the euro zone becomes more clear," a senior euro-zone government official said. Some Portuguese officials are privately considering the possibility, this official said.

Portugal has raised €4.75 billion ($6.5 billion) via bond sales so far this year. But it now faces redemptions totaling €3.848 billion in maturing Treasury bills in March, according to data from Portugal's Treasury and Government Debt Agency. It then has €4.342 billion in bond redemptions in April, followed by €4.933 billion to be paid out in June.

That borrowing volume will come at a stiff price. Ten-year Portuguese yields Tuesday were hovering near multiyear highs of 7.344%, well above the 7% level at which debt-servicing costs are deemed unsustainable.

The Portuguese debt agency skipped a time window for a bond auction this week, probably because of high costs. At these levels, Portugal is paying a painful 4.18 percentage points more than the German government on equivalent 10-year bonds.

WSJ

worldtraveller

Portugal is soon expected to seek a bailout loan from the European Union and the International Monetary Fund, which could be around EUR80 billion, a senior euro-zone government official said Thursday.

"The amount has yet to be decided as there is no request from Portugal yet, but that request should not take long as their borrowing costs are climbing fast. The amount should be around EUR80 billion. It could change but that's the talk in the euro zone right now," the official, who is directly involved in euro-zone talks, told Dow Jones Newswires.

Asked when he expected Portugal to seek a bailout loan he said:

"We will have a more clear picture after the summit meetings today and tomorrow. Portugal's government warned parliament that if their new set of austerity measures is not passed, a bailout is basically unavoidable. I think the only question is whether a caretaker government can negotiate the bailout or we will have to wait until after their elections," he said.

Eurogroup President Jean-Claude Juncker said earlier Thursday that an "appropriate" size for a Portuguese bailout would be EUR75 billion if the country were to ask for one.

WSJ

...Get in line....Get in line....Keep that queue straight....!

Generali

The trouble is, the ECB may well be disinclined to make a bailout deal with no Government in place (as may well be the case by the end of the weekend) and a 2 month gap until elections can be held.

There's no point in bailing out Portugal unless they can work out a way politically to cut the gap between taxation and spending. That can't be tested unless there's a Government in place and the last one failed to find a way to do that.

edinburgher

The trouble is, the ECB may well be disinclined to make a bailout deal with no Government in place (as may well be the case by the end of the weekend) and a 2 month gap until elections can be held.

Also, who has the mandate to strike a deal if there's no government as such?

tomterm8

The real problem for Portugal is that, realistically, it can't sort this mess out without devaluation. A bailout is not going to solve its problems... like Ireland... it is just delaying an inevitable default. It can't afford to repay its debts. Lets face it, even if it defaulted tomorrow... the deficit is still unsustainable economically. It needs to leave the eurozone.