[转贴] Portugal Has Opened Pandora's Box, And Borrowing Costs Are Blowing Out Today

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Portugal Has Opened Pandora's Box, And Borrowing Costs Are Blowing Out Today
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Matthew Boesler Jul. 12, 2013, 10:44 AM 492 inShare.1
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inShare. Email Share on Tumblr diggThe chart below shows the yield on Portugal's 10-year government bond. Today alone, it's up a massive 55 basis points to 7.24%, the highest level since December.

The country has descended into political crisis over the implementation of austerity measures designed by troika creditors at the EU, IMF, and ECB.

This morning, it's been reported that the opposition is calling for a renegotiation of the terms of Portugal's bailout package.

Last week, Portuguese finance minister Vitor Gaspar resigned over the austerity program.

"Mr. Gaspar's resignation on July 1 has opened a Pandora's box," says Nicholas Spiro, managing director of Spiro Sovereign Strategy. "Portuguese politicians from the President down are treating the exit of Mr. Gaspar, the architect of the fiscal and structural reforms demanded by the troika, as a green light for a public debate about the bail-out programme.  Yet the manner in which this debate is taking place, with the President undermining the prime minister and the opposition leader seeking to renegotiate the terms of the programme, is spooking markets."

Spiro calls this the "Gaspar effect," asserting that "Portugal has rapidly become the focal point for market nervousness in the eurozone periphery."

"I have been surprised that markets haven't been able to brush off the effect of Portugal's political crisis," writes Société Générale strategist Kit Juckes in a note to clients this morning. "I didn't (don’t) think this will be anything more than a temporary block to peripheral spreads re-tightening (along with corporate bond spreads) even though the big structural problem remains: Southern Europe is tackling real currency misalignment with deflation, which is making their debt position even less sustainable. Europe’s rates markets can edge slowly back down as they price in 'lower for even longer than the US'. When they do, EUR/USD will drift lower again."





Read more: http://www.businessinsider.com/p ... 013-7#ixzz2YrDI6mma