All Eyes on Portugal

With Ireland agreeing to be squeezed by the EU/IMF, focus now turns to Portugal.

Credit Default Swaps on Portugal are wider today by 23 basis points.

UPDATE: CDS on Portugal now up 40 bps.

Moody's Considering Portugal Downgrade

Moody's Investors Service is more likely to downgrade Portugal's credit rating after putting it on a three-month review than when it first placed the country on negative outlook last year, a senior Moody's analyst said on Wednesday.

"We have sent a signal that it is possible, and I have to say, statistically, there is a very strong likelihood that if we put it on a review for downgrade then we follow through with a downgrade," Anthony Thomas, vice president at Moody's Sovereign Risk Group, told Reuters.

PIIGS Debt Panic!!

Greek CDS 855, Portugal 400

Now Poland Under Attack

Polish CDS prices are nowhere near the PIIGS, but they are moving in that direction. CDS rates earlier today: 5Y Poland CDS +20% at 152bps, Portugal +13% at 440. Greece at 945bps.

While Greek Debt Stabilized on News Of Greece Seeking EU/IMF Aid...

...the five year Portuguese yields rose from 3.84% to 4.26%.  The five year Spanish bonds rose from 2.89% to 3.03%, and the five year Irish bonds rose from 3.74% to 3.97%.

Here's the problem as explained by Peter Boone and Simon Johnson:

When the problem was just Greece, the numbers were already large.  In our view, the Greek government needs 150bn euros over three years to be sure it can refinance itself through a recession.  The Portuguese will roughly need 100bn euros.  If those amounts were made available – will that support the confidence needed to buy Irish and Spanish bonds, or would it scare investors because the protests from Germany would be so large that it would be clear no more funds would be available in bailout mechanisms? 

Beyond this is the reality that none of the governments in these countries are going to do anything to cut spending. The political climate is just not there to do so. This means any money sent to these countries is simply a patch job. The spending won't stop and so the crises will re-emerge.

Greece, Portugal Default-Protection Costs Soar

The cost of insuring Greek and Portuguese bonds against default is soaring in markets this morning and Greece’s benchmark 10-year bond yield rose to 8.564 percent, more than twice the rate on bunds.

Greek bond spreads are at 562 bps, 3 years are at 870, and CDS is at 806.

Interest Rates on PIIGS Debt Soars

Greek government bond yields are at the highest levels since the country joined the eurozone 12 years ago, with the yield on 10-year bonds climbing 42 basis points to 8.28 per cent as concerns mount over a bail-out package from the International Monetary Fund and whether a debt restructuring can be avoided, reports FT.
Portugal's 10-year government bond yields hit highs of 4.82 per cent, a climb of 21bp. Portugal’s 10-year government bonds previously peaked at 4.77 per cent in February.

Credit default swap spreads continued to widen on Greek debt. The five-year CDS reaced an all-time high of 475bp.

Portugal spreads widened 16bp to 215bp