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Portugal Is Outtahere: Country Sells 6 Month Bills At Ridiculous 5.117%, 12 Month At 5.902%, Social Security Fund Stuck With Bill

Tyler Durden's picture


Earlier today Portugal, by the skin of its teeth, sold €1 billion in 6 and 12 month Bills, which however may be its last auction before the country is forced to beg for a bailout: the yield on the 6 Month bill rose from 2.984% three weeks ago to 5.117%, while the 12 Month surged from 4.311% to 5.902%. This is simply a ridiculous yield and at this rate pretty soon the country will be paying more to issue Bills than Bonds. "I suspect that as far as the market is concerned, funding at these levels can only be viewed as a temporary measure," said Peter Chatwell, rate strategist at Credit Agricole. "There has been a very important signal from the
banks for the future," said BNP Paribas analyst Ioannis Sokos. "Portugal
can still make it through April, but probably won't get to June without
a bailout." Which incidentally is when the country is going to have new government elections: cruising through a period of insolvency without
a man in charge is probably not the best idea. But what is worst is that the country's social security fund is once again rumored to have been a buyer of last resort. Since these bonds will eventually default, Portugal's pensioners will not be happy to find out that a notable portion of their retirement capital will soon be wiped out.

From Reuters:

Two business newspapers said the public social security fund has been selling overseas financial asets in the last few days to help finance the state by buying sovereign debt at auctions.

Jornal de Negocios and Diario Economico said the Social Security Financial Stabilisation Fund planned to buy T-bills in Wednesday's auction. No one was available for comment at the fund.

The Portuguese banks suggested the government should seek a bridging loan, but neither the EU nor the IMF is likely to offer such temporary finance without negotiated formal conditionality.

Analysts say the high yields, which have already topped 10 percent for five-year bonds, are unsustainable. The fall in the value of the bonds also undermines its banks, who have been substantial buyers of government debt.

"The rating actions follow the downgrade of Portugal's debt ratings and also reflect the weakened standalone credit profile of most Portuguese banks," Moody's said in a statement.

The banks concerned included Caixa Economica Montepio Geral, Caixa Geral de Depositos, Banco Comercial Portugues, Banco Espirito Santo, Banco BPI, Banco Santander Totta and Banco Portugues de Negocios.

Portugal has to repay over 4.2 billion euros in maturing bonds on April 15, and then another 4.9 billion euros in June. Including coupon payments and deficit financing, its requirements until June are put at 12 to 15 billion euros.

"From the pure cash perspective, April should be OK, even with coupons and deficit financing, but then if the domestic bid disappears, there's not much room for manoeuvre," Commerzbank's Schnautz said, referring to the local banks' threats.

He expected the six-month T-bills to yield between 5.5 and 6 percent -- about double the 2.98 percent average yield in the previous auction on March 2 -- while the borrowing cost for the 12-month paper should rise above 6 percent compared to 4.33 percent in mid-March.

At this point we are merely seeing a repeat of what happened in Greece last year. And the longer it takes Portugal to admit defeat the greater the cost for everyone involved. But all shall be well: after all there is a big, fat CDO at the bottom of it all to bail everyone out. And let's not forget that the ECB is about to hike rates and set off a chain of events that will end the Eurozone.

Surely this will end so very well.


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Wed, 04/06/2011 - 07:17 | 1140056 HamyWanger
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I heard Portuguese chicks are hot. Maybe we should invite them to the US of A, where nothing seems to trouble either the US consumer or NFLX, both scoring fresh 52-week highs.... 


Wed, 04/06/2011 - 08:04 | 1140149 Manthong
Manthong's picture

Wow! I think they found a solution to all of our problems. Since pension plans have all of that money piled up they can now fund government!

Why, we can do that here, too. The Social Security trust fund lock box file cabinet is overflowing with valuable reserves.

We don't need no stinkin' Fed.

I can finally go and sell all of my metal now.

Wed, 04/06/2011 - 08:37 | 1140250 pazmaker
pazmaker's picture

no but look for them to fund it with IRA's and 401K's

Wed, 04/06/2011 - 09:37 | 1140421 TO
Wed, 04/06/2011 - 08:12 | 1140180 Sudden Debt
Sudden Debt's picture

Portugese "woman" have mustaches just like the Greek "woman".

So if you're into that... go ahead! They are all yours!



Wed, 04/06/2011 - 08:21 | 1140203 youngman
youngman's picture

Do they have those nise big black rubber the Polish women do...I love that..a mustache and rubber o man

Wed, 04/06/2011 - 08:40 | 1140253 Sudden Debt
Sudden Debt's picture

I like my woman silky smooth. The only hair I'll tolerate is a landing strip on Venus Hill.


Wed, 04/06/2011 - 07:18 | 1140060 TexDenim
TexDenim's picture

The Merchant of Lisbon is having a field day! Buying bonds from nations in Europe is a no-brainer! Give me as many as you can print! They will make good eventually. Portugal has lasted nearly a millenium as a nation. I'll get my principle back eventually, and in the meantime I've got a ridiculous coupon. Do it now!

Wed, 04/06/2011 - 07:24 | 1140066 lance_manion
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A man may temporarily forgo his principles, but will you get your principal back?  :)

Wed, 04/06/2011 - 08:11 | 1140171 Sudden Debt
Sudden Debt's picture

principals don't get you pussy ;)


Wed, 04/06/2011 - 07:27 | 1140078 Hedge Jobs
Hedge Jobs's picture

hmmm...precious metals or portugese bonds? think ill stick to PMs TD but thanks for the tip!

Wed, 04/06/2011 - 07:18 | 1140061 falak pema
falak pema's picture

No they have a lot of empty houses. They're counting on those rich Japs settling their northern cousins from Fukushima on the Portuguese coastal towns where it's all up for grabs! real estate bonanza and japanese industry coming to Purtugaaal!

Wed, 04/06/2011 - 07:17 | 1140062 Miles Kendig
Miles Kendig's picture

Smoke 'em if ya got 'em

Wed, 04/06/2011 - 07:19 | 1140063 Tense INDIAN
Wed, 04/06/2011 - 07:21 | 1140068 israhole
israhole's picture

Does anybody have experience with this site:

I discovered Gary Savage two months ago, and as far as I can tell his subscribers have been on the right side of this move in precious metals and making a bundle.  I don't subscribe to any newsletters because I've found them to be full of hot air, but Mr. Savage seems to be different.  

Any feedback is appreciated.

Wed, 04/06/2011 - 07:26 | 1140075 Tense INDIAN
Tense INDIAN's picture

the two charts looks same .....

Wed, 04/06/2011 - 07:31 | 1140086 israhole
israhole's picture

Thanks.  It looks EXACTLY the same!

Wed, 04/06/2011 - 18:31 | 1143097 Hephasteus
Hephasteus's picture

Nice charts. Right on about the dollar. It'll break 75 and then hit 74 and then it's off to never been this fucking worthless in history land.

Wed, 04/06/2011 - 07:31 | 1140080 The Profit Prophet
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Here's some feedback: you're an extremely stupid person if you think you can fool the ZH community with this type of post.

Go hock your wares someplace else!

T.E.I.N. everyone!

Wed, 04/06/2011 - 07:35 | 1140087 israhole
israhole's picture


Btw, what is TEIN?

Wed, 04/06/2011 - 08:41 | 1140259 Jim in MN
Jim in MN's picture

TEOTWAWKI is here so XYZ and CYA, is what I think it means.

Wed, 04/06/2011 - 07:51 | 1140121 Hedge Jobs
Hedge Jobs's picture

the only site you need is ZH and listen to common sense. stop looking at things (PMs) as if they are going up but rather as the USD going down.the USD is possibly in the early stages of collapse. thats what you need to hedge against. have a look at USD against PM's the AUD CAD CHF or any other currency that is not being debased. No you wont see it in the DXY becuse its compared to other junk fiats like the EUR and JPY.  If / when QE3 is announced that could be the catalyst for a larger scale USD collapse . The USD has become like a hot potatoe and no one wants to be left holding the toilet paper when everyone else realises its true value, which in the end will be zero.

Wed, 04/06/2011 - 08:07 | 1140161 TaxSlave
TaxSlave's picture

Yeah, what Hedge Jobs said.  I didn't incur the debt, and I'm not paying it.  And I'm not storing any of my savings in paper currency that someone else can just print while I have to slave away to get every dime.

That should about sum up what's going on and what's going to happen.  You can probably time what's going to happen by gauging the percentage of common people that come to the same conclusion.  Watch out for critical mass.  The canoe is going to get dumped.

Wed, 04/06/2011 - 08:23 | 1140216 youngman
youngman's picture

I wish they would talk about more than only the Euro/Dollar  ratio....two failing curriencies makes it look the world is AOK.....maybe it shoudl be the Dollar vs gold....or some other ounce of gold does not change...then the sheeple will see their dollar or EURO crashing....

Wed, 04/06/2011 - 07:24 | 1140069 max2205
max2205's picture

How long can they do this. 4 years so far No end in sight. CBs are doing a great job of kicking cans. Better than I could have imagined

Wed, 04/06/2011 - 07:27 | 1140079 Sudden Debt
Sudden Debt's picture

Looking to Japan = Decades more.


Wed, 04/06/2011 - 07:30 | 1140084 Popo
Popo's picture

Look to to the USSR = The better part of a century

Wed, 04/06/2011 - 07:24 | 1140070 Thomas
Thomas's picture

Portugal doesn't need a bailout; they're creditors need a bailout. Consequently, they decide to steal the money from some pension fund. If I were a pensioner in Portugal, I would be lockin' and loadin'.

Wed, 04/06/2011 - 07:25 | 1140071 SAME AS IT EVER WAS

Wed, 04/06/2011 - 07:26 | 1140077 Sudden Debt
Sudden Debt's picture

I was just talking to a Portugese collegue of mine over there and when we broke this subject, he was convinced that new elections will solve it all.

Default is something they don't believe in, and the real cause according to him was that private companies sucked to much on the state it's tits. But now the realise it's over with free money, all will be well....


I felt he didn't needed extra info about that. At least they still believe there is hope.

But it was clear that it was because of all those private companies who get to much money. I think it was Lenin ans Stalin who said about the same kind of stuff.... but that's another story :)



Wed, 04/06/2011 - 07:36 | 1140088 TheGreatPonzi
TheGreatPonzi's picture

Same thing in Paris. If you just suppose the French government *may* default, everybody looks at you like you're a mad man, and say that there is still lot of wealth that can be taken from private companies. 

I think people will get what they deserve... 

Wed, 04/06/2011 - 07:46 | 1140109 falak pema
falak pema's picture

If Sarkozy is in Africa it is to make sure that France has LT access to critical RM. Like in the past, but now, not on the back of STATE corporations but on the back of PRIVATE corporations (Total, Bouygues, Bollore, Areva, Eads, etc.).

This is the NWO's new mantra. Let the multinationals build our future. We are now irreversibly in a TWO tier economy world wide. The Oligarchy (1%) will defend its world wide interests. Even WB now openly admits it! He says USA now a plutocracy. Who can contradict the Oracle of Omaha!

Wed, 04/06/2011 - 07:55 | 1140131 Global Hunter
Global Hunter's picture

Absolutely!  This Ouattara guy who supposedly won the election and who the French and UN back is a former IMF guy.  Ivory Coast by African standards has excellent ports and infrastructure. 

When my wife met me she knew nothing about politics and markets just had no interest, just the other day when we saw the news on the Ivory Coast reported on from a pro "the west is there to help democracy for the people" slant, she said "Heart of Darkness all over again".  She is right on the money.

Wed, 04/06/2011 - 08:23 | 1140215 magpie
magpie's picture

Little Sarko preparing us for the PetroEuro, or even the CocoaEuro ?

Wed, 04/06/2011 - 08:30 | 1140234 Global Hunter
Global Hunter's picture

(former French colonies), have to get the bauxite out of Guinea, the cotton and gold out of Mali, gold, iron, copper and gold out of Burkina Faso and uranium out of Niger to French business efficiently and in a secure manner somehow.

Wed, 04/06/2011 - 09:00 | 1140312 Urban Redneck
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Rumble in Jungle - 2 Sarko v Soros in Conakry 2011. 

Wed, 04/06/2011 - 08:06 | 1140154 Sudden Debt
Sudden Debt's picture

You've been playing the game Tekken a bit to much :)

Wed, 04/06/2011 - 07:48 | 1140113 magpie
magpie's picture

Dammit Sudden Debt, we need an EU-VAT to pay for the coming Eurobonds.
And to spice up the security detail at that fancy "parliament" building you have...

Wed, 04/06/2011 - 08:09 | 1140163 Sudden Debt
Sudden Debt's picture


The portugese wouldn't be able to afford that. In western Europe taxes of 50 to 55% are commen. How much do those guys pay? I don't think it's any near to 50%.

The portugese, spanish duded, Greeks, Irish and all would become third world countries. It's even been debates that they should adopt those tax rates and that's why most of them riot. But they do want Europe to pick up the bill no strings attached.

Be carefull what you ask for ;)



Wed, 04/06/2011 - 07:35 | 1140089 topcallingtroll
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It is hard to believe that six percent bonds is such a.big deal. I had student loans at 9 percent and my first house was 9 percent interest also. The economy was doing ok back then too.

Wed, 04/06/2011 - 08:00 | 1140137 Global Hunter
Global Hunter's picture

Although not particularly wealthy, a socially stable modern Western European sovereign state is borrowing money for 6 months at a rate that is approaching your mortgage.  Ha.  

Wed, 04/06/2011 - 07:35 | 1140090 Bruce Krasting
Bruce Krasting's picture

So Portugal borrows at 4 and 6% for 6/12 months, and this is a crisis,

Three years ago these rates would have been about normal. Short term interest rates of 4-5% are not at all unusual for either the dollar or the Euro in recent history.

At some point over the next 24 months the US will issue 6-12 month bills. We will pay 4-5% for that. That will also be a crisis when it happens. But actually it is quite normal.

Funny how much things have changed.



Wed, 04/06/2011 - 07:54 | 1140124 traderjoe
traderjoe's picture

It's a crisis when you borrow at 6%, grow at 1% or less, and have debt to GDP over 100%. Welcome to the debt/death spiral.

Wed, 04/06/2011 - 08:01 | 1140146 Global Hunter
Global Hunter's picture

If this was a one off perhaps, but this is probably the first of many and in some time the most creditworthy will be at this rate.  Sort of puts a damper on this fantastic economic recovery and not to mention the fact that almost every nation has huge debt that will need to be rolled over at significantly higher rates.  Again placing more strains on this fantastic economic recovery. 

Wed, 04/06/2011 - 10:03 | 1140492 Hedgetard55
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+55 Joe.

Wed, 04/06/2011 - 08:15 | 1140184 ZackAttack
ZackAttack's picture

That's pretty much my retirement plan - 10y USTs at 15%.

Wed, 04/06/2011 - 08:29 | 1140227 youngman
youngman's picture

to bad the inflation rate will be 25-30% then

Wed, 04/06/2011 - 09:56 | 1140484 writingsonthewall
writingsonthewall's picture

Bruce - things haven't changed - things have simply 'met reality' and once again - reality bites hard on the fantasists.


Wed, 04/06/2011 - 07:37 | 1140094 Josephine29
Josephine29's picture

Where was the European Central Bank when it was needed?As explained below by the economist Shaun Richards it has been trying to shore up the ship for ages.

Actually I can go further as there has only really been one real buyer of Portuguese debt in recent times and it is the European Central Bank via its Securities Markets Programme. It is estimated to hold at least 20% of Portuguese government debt now. If you think about purchases of this size and the markets falls then you can come to only one conclusion there have no virtually no other buyers at all. The various politician’s are quite well off these days they could of course invest their own money….

One clear corollary of this is that the ECB has created a “false market” in Portuguese government debt. It appears to have forgotten that central banks are supposed to stop false markets rather than create them!

Wed, 04/06/2011 - 08:01 | 1140132 falak pema
falak pema's picture

the ECB has no real decision making power... until the shit hits the fan nationally...That is the European construct game, hybrid national cum semi-federal monetary Xanadu. There are NO Euro federal bond emissions, only NATIONAL ones. That says it all...As it has no say in govt. fiscal policy, it can result in mayhem. The FIRE economy in EU was a result of 'irrational exuberance' of EU private banks just like in USA. They've sucked in the 'toxic' cycle into EU. Now the public sector pays instead of letting them rot and nationalizing their normal credit outlets to protect the small man's bank savings. But that's like pissing in the wind...with the globalised power house of financialized banking. National Politicians don't have power or guts to do that.

Wed, 04/06/2011 - 08:05 | 1140155 magpie
magpie's picture

slight correction FP, but the EFSF issued some bonds in February i believe - de facto Eurobonds.

Wed, 04/06/2011 - 09:28 | 1140397 falak pema
falak pema's picture

it must have been a one day fantasy for JCT... but then he's up to his neck now in real paper printing shit...for a mega crisis he didn't make...but for which he is now called to front line duty..Print away can't kick the can anymore than day it'll be world war or deflation time..

Wed, 04/06/2011 - 10:42 | 1140766 magpie
magpie's picture

JCT's secret is that they are just Bunds with higher interest.

Wed, 04/06/2011 - 07:43 | 1140098 magpie
magpie's picture

This was pretty dumb, if you're paying high rates anyway why not go to the longer end and have a few billion less to roll; but who cares, that's all the EFSFs, SAFEs or the next bagholder government's, which i am sure will be empowered enough to solve the crisis (cough), problem now.

Wed, 04/06/2011 - 08:09 | 1140168 darteaus
darteaus's picture

Because you want to leave a mess for the - probably - new governement coming in June.

You want to leave them a bigger mess in order to boost your chances of coming back in 2 years!

Wed, 04/06/2011 - 08:00 | 1140140 israhole
israhole's picture


Wed, 04/06/2011 - 08:43 | 1140265 Jim in MN
Jim in MN's picture


Wed, 04/06/2011 - 08:09 | 1140162 darteaus
darteaus's picture

"But what is worst is that the country's social security fund is once again rumored to have been a buyer of last resort."

HAHAHA - Just like in the US.

Wed, 04/06/2011 - 08:44 | 1140267 M.B. Drapier
M.B. Drapier's picture

From Eurointelligence, without comment or endorsement:

Is Portugal heading for a disorderly default?


Portugal’s big banks threatened to stop buying government debt; analysts start to wonder whether it already too late for Portugal to apply for an EFSF loan.

I don't have anything more as this is apparently a teaser for Eurointelligence's premium contents.

Wed, 04/06/2011 - 11:10 | 1140936 THE DORK OF CORK
THE DORK OF CORK's picture

Whats happening in Europe is the anti version of the 19th century European bond market where you had a pretty stable gold price and  positive yield on sovergin debt when not defaulted on.

Now we live in real negative yield land where the Gold price needs to go much higher to recapitalise balance sheets yet the ECB is failing to engage reality and continues to not incorporate enough sovergin debt on their balance sheet and recognize this reality.

It wants high yields on the periphery to give players the option of holding paper with a possible higher return then Gold.

This gross interference with sov debt is collapsing commerce on the periphery with hugely negative results as various actors hoard paper rather then transact with the stuff therefore limiting the medium of exchange function of money creating gross inefficiency.

The ECB is some animal - it needs to be cut down to size - there paper games will soon be over but unfortunately if they keep this malice up for much longer it will result in some form of breakdown crisis.

Wed, 04/06/2011 - 09:02 | 1140305 acrabbe
acrabbe's picture

Anyone have any insight as to how probable it will be that Portugal will be able to make that ~$4B maturity payment on April 15? The article suggests that if the domestic bid for gov debt disappears then that will negatively impact their cash enough to jeapardize the April 15th payment. If that happens, they will have to sell foreign assets at an even greater rate to finance the payment. Can the market handle the selling presssure that is about to kickoff in a concerted liquidation? It's a bigger problem than just the ~4B payment. Their inability or difficulty to make this payment is going to continue to put upward pressure on yields and force an resolute debt event BEFORE that 2nd June maturity payment. I see a possible flash crash or major global market selloff here, especially as the facilities put into place after Greece were supposed to be Stabilizing. Yet here we are at portugal, meaning the next victims will be spain and italy. And we all know there are connected vultures sitting on massive otc deriv's (i.e cds) that will profit from all these eurozone defaults. This sounds like an optimal time for them to push the envelope and break through stressed portions of the "defensive monetary sheet" that's been put up by the ECB. The VIX is showing major complacency here. I see a mega trade.

Any astute observers care to weigh in?

And to add, an upcoming selloff jives with the PM trade getting short-term crowded. I mean CNBS and BB alll touting commodities and silver/gold. inflation trade, blah blah blah.... sounds like a short-term bull trap right before a mother of a selloff hits the market for a 10-15% correction and takes gold and silver down with it temporarily. Serious thoughts here? I think there is a shitload of money to be made over the next few weeks frontrunning this trade. Think flash crash 2. bottoms out by beginning of may. sell in may and go away is another point of downward pressure hinting at an early exit for most preemptive sellers

Wed, 04/06/2011 - 09:10 | 1140337 TaxSlave
TaxSlave's picture

"Bondholder haircuts" and CDS defaults?  Delete a few digits and promise not to do it again.

Wed, 04/06/2011 - 09:22 | 1140369 Randall Cabot
Randall Cabot's picture

"A successful debt offering from Portugal has helped Europe's major bourses put together some solid gains.";_ylt=AkqykwSdjqKxUn.bEL4Z...

Wed, 04/06/2011 - 10:04 | 1140503 Hedgetard55
Hedgetard55's picture

Portuguese make terrific wines, and not just Port.

Wed, 04/06/2011 - 10:43 | 1140774 magpie
magpie's picture

I'm very partial to a bearer bond with dividends in Madeira.

Wed, 04/06/2011 - 10:43 | 1140754 Dick Darlington
Dick Darlington's picture

In the european sovereign debt ponzi scheme this is very bullish. Every periphery market is rallying hard today. And it seems that the deeper into the hole the insolvent countries get the more these ridiculous markets tighten. In the end, of course, the whole political utopia will collapse but it's just overwhelming to listen the banksters spin how great things are in Europe. It's the Germany's boom that masks the rotten periphery but who counts.

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