315 lines
11 KiB
Plaintext
Executable File
315 lines
11 KiB
Plaintext
Executable File
finance
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economics
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8241126
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-----
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# Portugal's borrowing costs jump on deficit fears
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## Portugal found its six-month borrowing costs have soared, when the country
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became the first of the high-deficit eurozone nations to test investor demand
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for its debt today.
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400
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227
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TelegraphPlayer-8219372
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[Link to this video][1]
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Bloomberg and agencies 2:08PM GMT 05 Jan 2011
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[Comments][2]
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The Portguese government sold €500m (£423.9m) of bonds repayable in July, with
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a yield, or interest cost, of 3.686pc.
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That compared with a yield of 2.045pc in an auction of bonds of a similar
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duration in September, and the 0.592pc yield when Portugal sold six-month
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bonds a year ago.
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Investors have been looking around the eurozone for the next likely candidate
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to require financial aid, since Greece had to seek a bailout in the spring,
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and Ireland gave in to demands to take loans from the European Union and
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International Monetary Fund to prop up its banks in November.
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Portugal and Spain were seen as strong possibilities, although both nations
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have said they won't need bailouts, and are taking action to reduce government
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spending through public sector wage cuts and, in Portugal, raising VAT to
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23pc.
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Portugal posted the biggest budget shortfall among the 16 countries using the
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euro in 2009 after Ireland, Greece and Spain.
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## Related Articles
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* [Europe unveils sweeping plans to govern banks][3]
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06 Jan 2011
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* [Citigroup fears wave of eurozone defaults][4]
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22 Dec 2010
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* [Record spike in EMU default risk][5]
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24 Dec 2010
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* [Portugal approves austerity measures][6]
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26 Nov 2010
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* [Portugal puts up fight against debt crisis][7]
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25 Nov 2010
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It set a target for a budget deficit of 7.3pc of GDP last year and 4.6pc in
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2011, and aims to reach the European Union limit of 3pc in 2012.
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Today's auction shows investors are charging Portugal seven times more than
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they demand from Germany for six-month money. Germany also held a bond auction
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today.
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"Yields are tremendously high for a six-month bill, still showing that
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Portugal has no place to hide on the curve," said David Schnautz, a strategist
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at Commerzbank AG in London. "The first real test will be the bond auction,
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which can happen as soon as next week."
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Portugal doesn't face any bond redemptions until April, with repayments that
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month and in June worth about €9.5bn. The nation's debt agency estimates this
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year's gross financing needs will be €3bn lower than in 2010, and plans to
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sell a new bond through banks in the first quarter.
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Spain will sell €93.8bn of bonds this year, compared with €93.5bn in 2010,
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while Italy's borrowing needs will decline to €225bn from €249bn, according to
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figures compiled by Barclays Capital.
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Portugal's debt rating was cut one level by Fitch Ratings on December 23,
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which said the economy faces a "deteriorating" outlook. The grade was lowered
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to A+, the fifth-highest level, from AA-. Fitch said the outlook for that
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assessment is negative, meaning it is more likely to worsen than improve.
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Moody's said last month Portugal's bond rating may be downgraded one or two
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levels because budget cuts may worsen the country's "sluggish" economic
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growth. Moody's cut Portugal's credit rating two steps to A1 in July. Standard
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& Poor's said in November it may lower the country's rating, having already
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cut it to A- from A+ in April.
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[X][8] Share & bookmark
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[What are these?][9]
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* Share: [Share][8] [ ][10] [ ][11]
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[Tweet][12]
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http://www.telegraph.co.uk/finance/economics/8241126/Portugals-borrowing-
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costs-jump-on-deficit-fears.html
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Telegraph
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## [Economics][13]
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* ### [Portugal »][14]
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* ### [Finance »][15]
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* ### [Business Latest News »][16]
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* ### [Interest Rates »][17]
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In finance
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[![Riot police use tear gas as protesters throw petrol bombs in Athens][18]
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][19]
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### [Tear gas and petrol bombs][19]
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[![IMF Global Financial Stability Report: the key points][20] ][21]
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### [IMF Stability Report: key points][21]
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[![Indebtedness and Leverage in Selected Advanced Economies (as a percent of
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2010 GDP) ][22] ][23]
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### [Threats to world economy: in charts][23]
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[![Monetary Policy Committee members: the hawks, the doves and the in-
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betweeners][24] ][25]
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### [Interest rate split: how they voted][25]
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[![][26] ][27]
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### [Top 10 economics stories of 2010][27]
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[X][8] Share & bookmark
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Delicious Facebook Google Messenger Reddit Twitter
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Digg Fark LinkedIn Google Buzz StumbleUpon Y! Buzz
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[What are these?][9]
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Share:
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* [ ][8]
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* [ ][10]
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* [ ][11]
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* [Tweet][12]
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* Advertisement
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![][28]
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telegraphuk
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Please enable JavaScript to view the [comments powered by Disqus.][29] [blog
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comments powered by Disqus][30]
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Advertisement
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[Market Data »][31]
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sponsored features
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* TODAY
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3. [BMW blames speculators as aluminium costs rise][34]
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4. [US consumers in spending retreat][35]
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2. [Dominique Strauss-Kahn: DNA samples confirm sperm traces on maid's
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madam'][42]
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