Friday, March 25, 2011

Interest Rates on Portugese Government Debt Hits New High on Downgrade

Standard & Poor’s has cut Portugal’s credit rating by two notches, from A- to BBB.
S&P also warned that it could cut the country’s rating by a further notch depending on the outcome of negotiations on the eurozone’s bail-out fund.

Interest rates on Portuguese government bonds first climbed on Thursday following the resignation of Portugal's prime minister. The yields on 10-year Portuguese bonds rose agian on Friday rose by another 12 basis points to euro-era high of 7.78%, following S&P's downgrade.

At a rate of 7.78%, the cost to service Portugal's debt becomes clearly unsustainable.

Prime Minister José Sócrates resigned yesterday following a failure of Portugal's parliament to approve austerity measures.

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