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Portugal Bund Spreads Even Wider Following Substantially Reduced Bill Auction And Much Higher Auction Yield, CDS Hits Record

Tyler Durden's picture


Europe bailout tracker update: Portugal edition. Hey Almunia, is there anything to be concerned about in Portugal? We thought so... The country's 10 year spread is now 18 bps wider to 147 bps after the country just had an almost failed BILL (12 months) auction. The country had previously announced an indicative offer of €500 million in 12 month bill to be auctioned. The result- a sale of just €300 million at yields over 50 bps higher compared to just two weeks ago. Oh, forget Greece, Portugal CDS is now trading at record wides.

From Dow Jones:

The bad reception of the Treasury bill auction follows Bank of Portugal Governor Vitor Constancio's gloomy comments on Portugal's economy Tuesday, saying the Portuguese government will have to make better efforts to contain spending and also may need to raise taxes to cut the country's budget deficit to 3% of gross domestic product by 2013.

Market watchers, however, said the debt agency's decision to sell fewer Treasury bills than planned was a "clever" move.

"The market is now punishing Portuguese government bonds," said David Schnautz, strategist at Commerzbank AG in Frankfurt. He called the move to sell fewer bills "obviously" a "clever" one, especially as Portugal is under
scrutiny from the market, just like Greece. "It is currently very important also for Portugal not to look too desperate to secure funding," he said.

Portugal's debt agency sold EUR300 million of the January 2011-dated Treasury bills, less than the indicative amount of EUR500 million. The average, maximum and minimum yields were set at 1.379%. This is sharply higher than the average yield of 0.928% on Jan. 20.

Portuguese Prime Minister Jose Socrates, meanwhile, defended the country's economic situation in an interview with French daily Liberation on Wednesday, saying Portugal's economic situation is not worrying.

Portugal's gross government bond issuance will between EUR5.5 billion and EUR6.5 billion in the first quarter, according to the plans Portuguese Treasury and Government Debt Agency, or IGCP, published Jan. 6.

Listening to all these Prime Ministers and Commissioners, one gets the impression that nobody in Europe is worried about anything than catching up with their siesta and Ouzo breaks. This is better known as prudent risk management: old world style.


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Wed, 02/03/2010 - 11:42 | Link to Comment Kissy Ass
Kissy Ass's picture

Zany, zealous, zippy, zonked. Brilliant work. Zero is the greatest.

Wed, 02/03/2010 - 11:45 | Link to Comment Jim in MN
Jim in MN's picture


Wed, 02/03/2010 - 13:44 | Link to Comment Anonymous
Wed, 02/03/2010 - 11:48 | Link to Comment Brother Revegen...
Brother Revegend Magoun's picture

How DEEP is this portuguese abyss?

Wed, 02/03/2010 - 11:49 | Link to Comment godfader
godfader's picture

Where are all those idiots who said they will convert all their USD to EUR when it was trading north of 1.50? So quiet now.

Wed, 02/03/2010 - 12:24 | Link to Comment Stranger
Stranger's picture

The structure of the Euro system actually makes the deflation debt apocalypse that has been promised everywhere possible there.

The EU does not collect taxes. Hence, it cannot issue debt on these taxes. Hence, it cannot bail out any member country.

Germany is not going to bail out other countries. That would be like Texas bailing out California, unthinkable and impossible.

The PIGS are not going to withdraw from the Euro. To seize control of the currency, states have to be at the peak of their power, typically during war-time. The PIGS are at the trough of their power. They are clinging to life and can't make people do anything.


Buying Euros may be the gamble that pays off the biggest this year.

Wed, 02/03/2010 - 13:02 | Link to Comment yabs
yabs's picture

if greece defaults and other pigs follow

and take back their original currency

wouldn't the euro go down?

Wed, 02/03/2010 - 14:40 | Link to Comment Stranger
Stranger's picture

What makes you think they have the power to take back their original currency?

It takes a ruthlessly united government to seize control of the currency, the kind that only exists in war-time.

Wed, 02/03/2010 - 14:53 | Link to Comment Anonymous
Wed, 02/03/2010 - 11:50 | Link to Comment bugs_
bugs_'s picture

Look, its Haley's Comet!

Wed, 02/03/2010 - 11:51 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Who woulda thunk the latest tremors would begin in Europe?

The fact that "suddenly" (meaning over the past few months) they're having serious problems leads me to think either they want these problems to occur as an excuse for the collapse they knew they could never stop or they are deliberately pushing these patsy countries over the brink as an excuse............

Ideas anyone? I'll listen to any you have to offer except ones that claim "coincidences" which I gave up believing in shortly after Santa Claus and the Easter Bunny abandoned me. 

Wed, 02/03/2010 - 13:55 | Link to Comment bokapita
bokapita's picture

Remember where you heard it first:

  1. The eurocrats in Brussels want and believe there should be a federal europe with themselves in charge. This is, if anything, a quasi theological belief that is not subject to any empirical evidence to the contrary.
  2. As someone correctly pointed out, the peripheral countries (PIIGS) and quite possibly others, have been coerced rrather tightly into the German/French sphere of influence via the euro.
  3. The eurocrats desire for federation does not care about any little anomalies standing in its way such as democracy.
  4. The peripheral countries have a choice: (a) conform to German monetary and fiscal rules and stay in the euro or (b) refuse to do so, exit, and face a future of being either reduced to being de jure (rather than the current de facto) junior members of the federation or bought for cash by aforesaid German / French interests and thereby achieving the status of colonies.
  5. Either way the PIIGS countries get pushed into line and Brussels wins. The germans are not worried about the Brussels beaurocracy because ultimately Germany has the economic whiphand. The French are not worried about the BB because that beaurocracy was designed and built in France and only the French know how it works.

Thus, with a superb mix of condescention and 'we know best' the central powers of Europe will gain effective control of a new empire. I mean, we are looking at a deal here: let's not fight any more, let's just rule it between ourselves.

Wed, 02/03/2010 - 11:56 | Link to Comment cerpintax
cerpintax's picture

I can´t help to notice (as a portuguese) that you misspelled Portugal in the title!

In the other hand, keep up the good work...



Wed, 02/03/2010 - 11:59 | Link to Comment Zombie Investor
Zombie Investor's picture

Oh boy, pour me a Cockburn.

Wed, 02/03/2010 - 12:02 | Link to Comment Bylinka (not verified)
Wed, 02/03/2010 - 12:09 | Link to Comment Anonymous
Wed, 02/03/2010 - 12:10 | Link to Comment Anonymous
Wed, 02/03/2010 - 12:16 | Link to Comment Miles Kendig
Miles Kendig's picture

Give me leave to rail at you, -
I ask nothing but my due:
To call you false, and then to say
You shall not keep my heart a day.
But alas! against my will
I must be your captive still.
Ah! be kinder, then, for I
Cannot change, and would not die.
Kindness has resistless charms;
All besides but weakly move;
Fiercest anger it disarms,
And clips the wings of flying love.
Beauty does the heart invade,
Kindness only can persuade;
It gilds the lover's servile chain,
And makes the slave grow pleased again.

John Wilmot

Wed, 02/03/2010 - 12:16 | Link to Comment john_connor
john_connor's picture

Tick Tock.  Tick Tock.

Wed, 02/03/2010 - 12:20 | Link to Comment Anonymous
Wed, 02/03/2010 - 12:34 | Link to Comment Anonymous
Wed, 02/03/2010 - 13:04 | Link to Comment Zina
Zina's picture

Os gajos estão a se foder, ora pois...

Wed, 02/03/2010 - 13:09 | Link to Comment cerpintax
cerpintax's picture

Nice comment Zina...

Wed, 02/03/2010 - 13:13 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

It's all Greek to me, Dude. I know I'm just a ugly American but could you please translate into English, considering this is an English language web site?

Wed, 02/03/2010 - 13:22 | Link to Comment cerpintax
cerpintax's picture

Something like "they (portuguese) are getting screwed, as expected..." this is an interpretation, portuguese language is litle bit dubious.

The real problem for Europe will be Spain and, in a worst case scenario, UK but that is IMO.

Wed, 02/03/2010 - 14:21 | Link to Comment Zina
Zina's picture

That was with a characteristic accent from Portugal (at least the stereotyped accent that we, Brazilians, used to believe that people in Portugal have).

Wed, 02/03/2010 - 14:34 | Link to Comment Anonymous
Wed, 02/03/2010 - 14:32 | Link to Comment Anonymous
Thu, 02/04/2010 - 09:58 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

"...tries to act as smart as you do, CD,.."

As opposed to you, who are actually smart without really trying, right?

I make observations that apply to the world and how we deal with it, not just financial or economic. I'm the first to admit that I'm only scratching the surface and that I do everything I claim others do. I often speak using the words "I" and "we" to include myself in the subject, both because I am talking about myself and so as not to offend.

And you remain anonymous so that you can snip yet be invisible. Cowardly is what I would call it. At least I stick my neck out and can be identified and also searched for prior comments and history. You can get an ID and avatar and yet remain anonymous. So what's stopping you? Oh, that's right, so you can remain unaccountable.

Wed, 02/03/2010 - 14:37 | Link to Comment TraderMark
TraderMark's picture

"Don't worry, he Happy"

Spain will be the real fun... Portugal is actually a smaller economy than Greece.

Wed, 02/03/2010 - 15:02 | Link to Comment Anonymous
Wed, 02/03/2010 - 15:13 | Link to Comment Anonymous
Wed, 02/03/2010 - 15:58 | Link to Comment Anonymous
Wed, 02/03/2010 - 16:43 | Link to Comment omi
omi's picture

Weeeeee! it did a cup and handle thingy.

Do NOT follow this link or you will be banned from the site!