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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Kissy Ass's picture

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

Brother Revegend Magoun's picture

How DEEP is this portuguese abyss?

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.

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.

yabs's picture

if greece defaults and other pigs follow

and take back their original currency

wouldn't the euro go down?

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.

Anonymous's picture

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

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

And Latvia is arguably the EU member that is furthest along in its debt & wage deflation, so buying the Latvian lat (LVL) should be an even better gamble!

The forex speculators can't attack it because they can't borrow it anywhere.

bugs_'s picture

Look, its Haley's Comet!

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. 

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.

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...



Zombie Investor's picture

Oh boy, pour me a Cockburn.

Bylinka's picture
Bylinka (not verified) Feb 3, 2010 11:02 AM

Every effort is being taken in order to distract attention from USD, which is next in the domino row. Let the EURO fail, and may everyone buy dollars and USTs; but once the purchases will have been completed and the people are sitting on the wads of newly printed FRNs and USTs, what's next, where to invest? that is the question...  

Anonymous's picture

If you have read this site, you should know where..

Anonymous's picture

Meanwhile, US debt ceiling is increased by 1.9 trillion to 14.3 trillion .....

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

john_connor's picture

Tick Tock.  Tick Tock.

Anonymous's picture

Gold bitches

Anonymous's picture


Zina's picture

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

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?

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.

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).

Anonymous's picture

I believe the literal translation is "they (working class) are getting fucked, as usual. It would appear that the Portuguese model is similar in structure to the US model.

Anonymous's picture

You'd think somebody who tries to act as smart as you do, CD, would know that Google has a translate feature built into the search page now. It's less work than asking the board....

Just saying....

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.

TraderMark's picture

"Don't worry, he Happy"

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

Anonymous's picture

The Siesta is a Spanish thing... check your facts before playing smart-ass next time ;)

Anonymous's picture

Widened another 23bps (eonia+90) after the auction...Not a lot of DV01 out there 2 pay though. With VGH0/EUR trying to break lower (albeit on crap volume) not gonna be pretty in Lisbon tom.

Anonymous's picture

Who sells these CDS? How crazy do you have to be to keep issuing them?!

omi's picture

Weeeeee! it did a cup and handle thingy.