Investors demanded big premiums to lend to Portugal on Wednesday in the first test of market sentiment after European policymakers warned they would make bondholders foot a greater share of the losses for future state bail-outs.
Portugal, considered most at risk among the eurozone economies ? together with Ireland ? of following Greece in seeking financial assistance from the international community, saw its cost of borrowing jump more than 10 per cent for ?1.03bn in short-term loans.
John Wraith, fixed income strategist at BofA Merrill Lynch Global Research, said: ?Pressure is mounting on the so-called peripheral eurozone economies as the risk of restructuring or even default is now perceived to be greater. Unless you are a domestic investor, there is therefore less incentive to lend to these countries.?
Portugal paid 1.81 per cent for three-month loans compared with 1.59 per cent last month and 3.26 per cent for 12-month loans compared with 2.88 per cent last month.
Demand was weaker than usual as the three-month loans saw a bid-to-cover ratio of 2.2 times compared with 3.0 times last month and the 12-month bills saw demand drop to a ratio of 2.2 times compared with 2.4 times last month.
Jos� S�crates, Portugal?s prime minister, blamed the rise in yields on ?speculative movements?, saying growing pressure on the country?s borrowing costs had no economic justification.
The disappointing debt auction is the first held by one of the peripheral economies of Portugal, Ireland and Greece since European policymakers announced plans to make investors shoulder more of the costs of future sovereign bail-outs.
It reflects investor concern over holding the bonds of these countries amid expectations a new rescue system agreed at a summit of European leaders last Friday will lead to haircuts, or discounts, on the debt of countries that default.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.
No comments:
Post a Comment