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Post by jeffolie on Oct 14, 2011 16:09:31 GMT -6
Rates, yields rising means European trouble, Portugal Emergency, French banks & soveriegn bonds no longer close to Germany's bond yields " ... [ Italy's 10 yr rate today at 5.81% is approaching the slightly over 6% level that panicked the ECB into buying down Italy's rate back to under 5.00%] ... Portugal Faces National Emergency ... Portugal 10-year yield increased to 11.64 percent. The nation is planning to deepen budget cuts next year as it faces a moment of “national emergency,” and has to do more to meet its budget goals, Prime Minister Pedro Passos Coelho said. ... [ the market now ignore Greece's rate ie 1 yr at 166%] ============================== October 14, 2011 11:42 AM French Government Bond Yields Widen to Record vs. Germany; Portugal Faces National Emergency; Trichet Says "ECB Will Not Be Lender of Last Resort" Credit stress has now hit France sovereign debt. The spread between 10-year French bonds and German government bonds is at a Euro-era record 97 basis point differential. France 10-Year Government Bonds click to see chart in piece: globaleconomicanalysis.blogspot.com/2011/10/french-government-bond-yields-widen-to.htmlGermany 10-Year Government Bonds click to see chart in piece: globaleconomicanalysis.blogspot.com/2011/10/french-government-bond-yields-widen-to.htmlItaly 10-Year Government Bonds click to see chart in piece: globaleconomicanalysis.blogspot.com/2011/10/french-government-bond-yields-widen-to.htmlPortugal 10-Year Government Bonds click to see chart in piece: globaleconomicanalysis.blogspot.com/2011/10/french-government-bond-yields-widen-to.htmlSpain 10-Year Government Bonds click to see chart in piece: globaleconomicanalysis.blogspot.com/2011/10/french-government-bond-yields-widen-to.html Greece 1-Year Government Bonds click to see chart in piece: globaleconomicanalysis.blogspot.com/2011/10/french-government-bond-yields-widen-to.htmlFrench Bond Yields Jump Most Since 2008 Bloomberg reports French Bond Yields Jump Most Since 2008 on Bank Concern Ten-year French yields climbed 38 basis points this week, the most since the euro was introduced in 1999. The extra yield investors demand to hold 10-year French bonds instead of German bunds also expanded to the most since the euro started. Spain’s 10-year bonds fell for a fifth day after Standard & Poor’s cut the nation’s credit rating. Yields climbed across the euro area after European Central Bank President Jean-Claude Trichet said the ECB will not act as a “lender of last resort.” The eight largest U.S. money-market funds reduced their lending to French banks by 44 percent last month, according to filings compiled by Bloomberg and published in today’s Bloomberg Risk newsletter. Spanish 10-year yields climbed four basis points to 5.24 percent, even after the ECB was said by people with knowledge of the deals to have bought the nation’s securities. S&P cut Spain’s ranking by one level to AA-, with the outlook remaining negative, the company said yesterday. Portugal Faces National Emergency Portugal 10-year yield increased five basis points to 11.64 percent. The nation is planning to deepen budget cuts next year as it faces a moment of “national emergency,” and has to do more to meet its budget goals, Prime Minister Pedro Passos Coelho said. Trichet a Proven Liar Does this look like anything has been contained or does it look like the problem is spreading to France (as a result of foolish containment efforts)? By the way, Trichet is a proven liar. The ECB is already acting as a lender of last resort by supporting Italian bonds and foolishly buying Greek bonds previously. globaleconomicanalysis.blogspot.com/2011/10/french-government-bond-yields-widen-to.html
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Post by jeffolie on Mar 29, 2012 15:36:52 GMT -6
DAVID KOTOK: 'PORTUGAL IS UNRAVELING' Mar. 29, 2012If you want to know what's really going to set off the long-awaited Eurozone meltdown, look to the Lusophones. In his first note to investors back from his trip to Europe, Cumberland Advisors' David Kotok writes he's only grown more pessimistic on the situation, citing runs on Portuguese banks. "In my view, the situation in Portugal is unraveling. This may be the second shoe to drop in the European sovereign debt saga. Now that Greece has paved the way, the speed of unwind with Portugal may be much faster. I do not believe the markets are prepared for that." He adds that Portuguese credit spreads are so wide because the markets sense that another collective-action clause could be invoked, as was threatened for Greece. "The private-sector holders of Portuguese debt know that a CAC can be used on them, too." He also homes in on a subtle but portentous semantic trend that's emerged. Officials are no longer talking about "ring fencing" but rather "firewalls." "Systemic risk needs big firewalls. We learned that the hard way with Lehman and AIG, which were systemic, vs. Countrywide and Bear Stearns, which were “ring-fenced” – or thought to be ring-fenced at the time." Finally, Kotok warns that the crisis will get real ugly again as elections near. "The political risk is rising daily. Elections could change these governments, and the new governments may repudiate the actions of the old ones. We expect more strikes and unrest." Read more: www.businessinsider.com/david-ko ... z1qXkPHL8f ================================================= Back from Paris March 29, 2012 David Kotok We are back from Paris. The head is filled with new info. For the publicly available portion of the conference, see the GIC website, www.interdependence.org. The remaining comments will be my personal “takeaways” from both public and private conversations. By Chatham House Rule and Jackson Hole Rule, these words are attributable only to me. All errors are mine. We will use some longer bullets for a format. 1. In my view, the situation in Portugal is unraveling. This may be the second shoe to drop in the European sovereign debt saga. Now that Greece has paved the way, the speed of unwind with Portugal may be much faster. I do not believe the markets are prepared for that. Runs are affecting Portuguese banks. Euro deposits are shifting to other, safer countries and the banks that are in those countries. Germany (German banks) is the largest recipient. Remember, deposits in European banks are guaranteed by the national central banks and the national governments, not the ECB. There is no FDIC to insure deposits in the Eurozone. 2. The issue is that Greece was supposed to be “ring-fenced.” Notice how European leaders have stopped using that word. Their new word is firewall. If a second country (Portugal) restructures, the sovereign debt issues become systemic rather than idiosyncratic. That becomes the second game-changer. Systemic risk needs big firewalls. We learned that the hard way with Lehman and AIG, which were systemic, vs. Countrywide and Bear Stearns, which were “ring-fenced” – or thought to be ring-fenced at the time. 3. A game-changer was the use (not threat) of the collective action clause by Greece. CAC altered the positions of the private sector. It rewrote a contract after the fact. That is why Portugal’s credit spreads are wide: the private-sector holders of Portuguese debt know that a CAC can be used on them, too. The same is true for all European sovereign debt. A re-pricing of this CAC risk is underway. 4. Private holders of Greek debt had several years to get out before the eventual failure. Those that did not get out were crushed in the settlement. Greece is now a ward of governmental and global institutions like the ECB, IMF, and others. It is unlikely to have market access for years. This is another game-changer. In the old crisis days, the strategy was to regain market access quickly and restore private-sector involvement. In the new Eurozone-CAC crisis days, the concept is to crush the private-sector holders, and that means no market access for a long time. Instead, we will have ongoing and increasing sunk costs by governmental institutions. Caveat: government does not know how to cut losses and run. Government only knows how to run up small losses until they are huge. Witness Fannie Mae in the US. Witness the sequence that allowed Greece to fester for years. Government does not know how to take the “first loss,” which is usually the smallest lost. Government does know how to run up moral hazard. 5. The term moral hazard means the action is done today and the price is determined later, after the chickens come home to roost and crap all over the coop. That is the nature of government everywhere. By the time the chickens return, the political leaders have changed. Those who took the moral hazard risk are gone. Those who inherited their mess are blamed during the cleanup. That is where we are today in Europe. Hence, the political risk is rising daily. Elections could change these governments, and the new governments may repudiate the actions of the old ones. We expect more strikes and unrest. That is how elections can be influenced. 6. European debt-crisis issues are lessons for the US. They belong in the political debate. Both political parties are responsible for our growing debt issues. Bush ran up huge deficits. Obama continued them. Each party blames the other. Neither takes on the responsibility of their actions. We shall see how this evolves between now and November. Strategy issues for portfolio management I am more pessimistic about peripheral Europe than I have been. All that my co-author Vincenzo Sciarretta and I wrote in our book several years ago is now being reversed by policies. In the beginning, the Eurozone benefited immensely from economic integration and interest-rate convergence. Now it faces disintegration and divergence. Reverse the chapters in the book and play the film backwards. Can Europe find a stabilizing level and resume growth? Time will tell. Meanwhile, political leaders and central bankers are going to be tested again. This ain’t over. Yogi is correct. Alex Pollock of the American Enterprise Institute has a good essay on the history of sovereign default. There has been a lot of it. Here is the link: www.aei.org/outlook/economics/fi ... ebt-crisis . It is always good to be home. www.cumber.com/commentary.aspx?file=032912.aspjeffolie Posts: 3004Joined: Sun Jan 02, 2011 7:34 pm
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Post by jeffolie on Jun 24, 2013 12:42:57 GMT -6
Portugal’s birthrate plummeting, a sign of more economic trouble ahead June 23, 2013 LISBON — For an enterprise in the business of welcoming life, the birthing ward in Portugal’s largest maternity hospital is eerily quiet. On a recent morning, not a single expectant father nervously paced the orange laminated floors. Unhurried nurses passed rows of darkened rooms with empty beds, busying themselves with paperwork and a mere three women in labor. Elsewhere in the hospital, signs of Europe’s crisis within a crisis are everywhere. Serving a country that was battling a low birthrate even before the region’s economy fell off a cliff, Alfredo da Costa Maternity Hospital delivered about 7,000 babies a year until recently. But with economic uncertainty causing young couples to rethink family plans or leave these shores for other countries, the number of births crashed last year to 4,500, leading the hospital to mothball an entire wing and slash 20 percent of the staff. Portugal's baby bust The recent decline in births across Portugal — to 89,841 babies in 2012, a 14 percent drop since 2008 — has been so acute that the national government is moving to close a slew of maternity wards nationwide. In an increasingly childless country, 239 schools are shutting down this year and sales of products such as baby diapers and children’s shampoos are plummeting. At the same time, in the fast-graying interior, gas stations and motels are being converted into nursing homes even as stores selling toys and baby clothes close their doors. Here in Lisbon, Alfredo da Costa — founded in 1932 when this once-great maritime nation still commanded a global empire — is on the chopping block, set for closure this year. “We used to hear the best kind of cries in these halls, of babies,” said Teresa Tome, Alfredo da Costa’s head pediatrician, as she strode through the quiet birthing ward. She later added: “The recent decrease in births has been dramatic. This is because of the economic crisis, all the unemployment, all the uncertainty about the future. It is making a bad problem for the country worse.” Portugal is at the forefront of Europe’s latest baby bust, one that is shortening the fuse on a time bomb of social costs in some of the world’s most rapidly aging societies. As in many corners of the industrialized world, Europe has faced a gradual decline in birthrates since the 1960s. But in a number of the region’s hardest-hit countries, a modest rebound during the 2000s — when European governments welcomed immigrants and rolled out cash benefits for young couples starting families — has now gone into reverse. Birthrates are falling again in several nations that are confronting massive unemployment, including Portugal, Spain, Greece, Ireland and Cyprus. The baby shortage, economists say, is set to pile on the woe for a swath of the continent that may already be facing a decade or more of economic fallout from the debt crisis that started in 2009. A reckoning accelerates By 2030, the retired population in Portugal, for instance, is expected to surge by 27.4 percent, with those older than 65 predicted to make up nearly one in every four residents. With fewer future workers and taxpayers being born, however, the Portuguese are confronting what could be an accelerated fiscal reckoning to provide for their aging population. Portugal is ahead of other nations in Europe in planning for those explosive costs. But some government officials here concede that far deeper cuts — as well as a push toward a united social security system within the European Union — may be needed to cope with what is turning out to be a worse-than-expected demographic crisis. The diminishing number of young Portuguese could lead to a vacuum of dynamism and innovation in the years ahead, signaling what could be a long-term decline in the fortunes of nations in a region harboring some of the United States’ largest trading partners and closest political allies. The U.S. birthrate has also come down sharply since the 1960s. But the United States is projected to have a generous influx of immigrants in the years ahead while also maintaining a more robust birthrate than those European nations hit the hardest. With deaths regularly outpacing births and both native-born Portuguese and immigrants from former colonies such as Brazil and Angola departing the country in large numbers, the population is falling. Some hold out hope that the birthrate will bounce back if and when the economy improves and young Portuguese feel more secure about their future. But experts predict that the population loss ahead could be beyond even the worst-case predictions of nearly 1 million inhabitants fewer — or almost 10 percent of the current population of 10.56 million — by 2030. That has many here bemoaning the “disappearance” of a nation and asking: Who will be left to support a dying country of old men and women? “This is one of the biggest problems we face as a nation,” said José Tavares, a political economics professor at the Nova School of Business and Economics in Lisbon. “If we don’t find a way to fix this, we will be facing a disaster.” Fearing for the future Along the narrow, hilly streets of the inland municipality of Vila Velha de Rodao, Mafalda Diogo Sabino’s fame is already legendary. The local newspaper heralded her arrival in September with a half-page spread and a goody basket of oils and lotions delivered to her door. Every day since, seemingly everyone has wanted a piece of the fickle little celebrity, with her adoring fans shadowing her in the hopes of pinching an unsuspecting cheek or catching a glimpse of her now-fabled smile. In this graying corner of the Iberian Peninsula, the 9-month-old’s claim to fame is merely being born. Communities such as this one, a conglomeration of villages with a population of 3,600 — nearly half what it was in the 1970s — have become ghosts of Portugal’s future. Mafalda’s mother, Susana Diogo, 27, had to travel two hours by car in the summer heat to give birth at the nearest hospital able to handle an expectant mother with diabetes. Diogo and her husband, Mario Sabino, 32, worry about their daughter’s future in a town with only three other newborns and just one school. “I wonder what Portugal will look like for both her and us by the time she gets older,” said Diogo, who lost her job when a nearby call center closed after she became pregnant. Here, care for the elderly is the largest single public expenditure. Recent national cuts have reduced the number of seniors the town is able to help in its main adult day-care facility. Local officials have sought to lure back young people, offering cash subsidies for new home buyers in an attempt to stem years of losses of working-age residents to inland cities and more prosperous countries. The town is providing preschool for next to nothing, using a corner of a nursing home for the children. Seniors living at the home, such as Maria Jesus Rodrigues, 87, relish the contact with children. “We used to have children everywhere when I was young. We never thought about the economic side; we just had them,” Rodrigues said. “But there are not so many now. Young people today are thinking more about how they will pay for children with so few jobs. I guess I understand.”A few minutes later, Rodrigues, who moved to the home from her nearby village, where the youngest resident is 57, burst into a local folk song. “I have to sing now,” she crooned, “because when I die, there will be no one left to sing for me.” www.washingtonpost.com/world/europe/portugals-birthrate-plummeting-a-signal-of-more-economic-trouble-ahead/2013/06/23/64c86c20-ced4-11e2-8573-3baeea6a2647_story.html?wprss&google_editors_picks=true
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Post by jeffolie on Jul 3, 2013 7:39:09 GMT -6
July 3, 2013 Europe stocks drop as Portugal rattles crisis cage (MarketWatch) — Europe stocks fell sharply on Wednesday as political turmoil in Portugal re-awakened sovereign-debt worries, triggering sharp gains in bond yields for that country and Spain.
Topping that off, turmoil in Egypt and downbeat data from China also dented sentiment. Portuguese exits hit markets European markets were under pressure Wednesday after Portugal’s foreign minister resigned, following the departure of the finance minister, triggering the country’s worst political crisis since its bailout two years ago. Martin Essex and Patricia Kowsmann report. A ratings downgrade from Standard & Poor’s also knocked shares in three of Europe’s biggest banks. The Stoxx Europe 600 XX:SXXP -0.89% fell 0.9% to 284.71, after closing 0.4% lower in Tuesday’s session. Sharper losses were pared after a batch of data in the U.S., which also helped U.S. stock futures pull back from a deeper fall. Wall Street will trade a shortened session ahead of the Independence Day holiday. Atop of the worry list were fears of another crisis in Europe. Concerns that Portugal may be facing a new government and financial credibility could be at risk.
The Portugal PSI 20 index PT:PSI20 -5.45% tumbled 5.6% to 5,220.45, reaching levels not seen since last November. Bank stocks plunged, with Banco Comercial Portugues SA PT:BCP -12.90% shares sinking 13% and Banco Espirito Santo SA PT:BES -10.46% tumbling 11%. The yield on Portugal’s 10-year government bond BX:TMBMKPT-10Y +20.07% shot above 7%. Reuters reported more ministers may be ready to resign in Portugal on the heels of two ministers who resigned in the last 48 hours. Prime Minister Pedro Passos Coelho said he will not step down after Foreign Minister Paulo Portas resigned Tuesday afternoon in protest over the country’s austerity policies. On Monday, the country’s finance minister, Vitor Gaspar, stepped down. The president of the European Commission, José Manuel Barroso, said the crisis risks jeopardizing the “financial credibility” of Portugal. “Expect the government to fall in the course of the next 48 hours. A new election will be called amid a huge drive towards ‘anti-austerity,’” said Steen Jakobsen, chief economist with Saxo Bank. “This is EXACTLY what German Chancellor Angela Merkel does not need.” Investors were also keeping a close eye on turmoil in Egypt, with crude-oil prices soaring above $101 a barrel as President Mohammed Morsi refused to step down. Clashes amid protests over his rule turned deadly on Tuesday. Morsi has just a few hours to go to a deadline imposed by the military, which called on him to resolve the country’s political crisis. Read: Egypt's Morsi rebuffs calls to step down Reuters Deutsche Bank shares fell Wednesday after a S&P downgrade. Banks in Portugal were not the only ones suffering. Shares of Barclays PLC UK:BARC -2.76% BCS -1.33% and Deutsche Bank AG DB -2.02% DE:DBK -2.56% dropped over 2% each and Credit Suisse SA CS -1.25% CH:CSGN -4.09% fell 3.7% after Standard & Poor’s lowered its long-term ratings on those banks. The ratings firm said new regulations and uncertain market conditions will make it tougher for those banks to operate. Data in Europe also did not help sentiment. Markit data released Wednesday showed the final euro-zone services business activity index revised down to 48.3 in June, from an initial reading of 48.6. The composite output index for the region was revised down to 48.7 in June from an initial 48.9. www.marketwatch.com/story/europe-stocks-tumble-on-global-worries-portugal-2013-07-03?dist=beforebell
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Post by jeffolie on Jul 3, 2013 17:07:43 GMT -6
July 03, 2013 Portuguese Bond Yield Spikes to 8% as Portugal’s Coalition Splinters on Austerity Fatigue Action has heated up in Portugal where the Ruling Coalition Splinters on Austerity Fatigue. Portuguese borrowing costs topped 8 percent for the first time this year after two ministers quit, signaling the government will struggle to implement further budget cuts as its bailout program enters its final 12 months. Government Tensions Social Security Minister Pedro Mota Soares and Agriculture Minister Assuncao Cristas will hand in their resignations to Coelho today, broadcaster TVI reported on its website last night, without saying how it obtained the information. Both ministers are from Portas’s CDS party. The EU may consider extending the deadline for Portugal to meet its deficit targets if economic conditions worsen, Jeroen Dijsselbloem, head of the group of euro-area finance ministers, said on May 27. Dijsselbloem said the government hasn’t yet requested another change of timetables and targets. On March 15, the government announced less ambitious targets for narrowing the budget deficit as it forecast the economy will shrink twice as much as previously estimated this year. It targets a deficit of 5.5 percent of gross domestic product in 2013, 4 percent in 2014 and below the EU’s 3 percent limit in 2015, when it aims for a 2.5 percent gap. Portugal forecasts debt will peak at 123.7 percent of GDP in 2014. Gaspar’s resignation shows the risk of reforms faltering, Organization for Economic Cooperation and Development Chief Economist Pier Carlo Padoan said yesterday at the Lisbon Council in Brussels. “Fatigue may suddenly erupt and the temptation to go backward may be very, very strong,” he said. Portugal’s Prime Minister Won't Step Down The Financial Times reports Portugal’s Passos Coelho pledges to stay as prime minister Portugal’s beleaguered prime minister has pledged to stay in office and seek to establish a stable government despite the resignation of two key ministers and the threatened break-up of his ruling coalition. Pedro Passos Coelho said on Tuesday night he would stay at his post and work towards a “rapid return to stability” to avert a political and economic crisis that would endanger the country’s €78bn bailout. “I will not resign or abandon my country,” Mr Passos Coelho said. However, opposition parties called for an early general election two years ahead of schedule, saying there was no possible solution for the governing coalition. “The country needs a new government with democratic legitimacy,” said António José Seguro, leader of the centre-left Socialists, the main opposition party. The prime minister was speaking hours after his government was rocked by the resignation of Paulo Portas, foreign minister, less than 24 hours after Vítor Gaspar had quit his post as finance minister. Mr Passos Coelho said he had refused to accept the resignation of Mr Portas, leader of the conservative Popular party (CDS-PP), the junior partner in the two-party government coalition. The government of Portugal is now burnt toast. There is no way it can survive. But will any other government do what is needed (default and tell the EU where to go)?Eventually some country will, as soon as the pain is severe enough Read more at globaleconomicanalysis.blogspot.com/2013/07/portuguese-bond-yield-spikes-to-8-as.html#bWzcOUXzXbJmL4sQ.99
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Post by jeffolie on Jul 11, 2013 17:17:14 GMT -6
July 11, 2013 Portugal Uncorks Bottle of EU Crisis Genie The Financial Times reports Portugal president’s call for national unity backfires [President] Aníbal Cavaco Silva’s call for a “national salvation” agreement between the ruling coalition and the main opposition party, leading to early elections in June 2014, was intended to restore calm following a government crisis triggered by the resignation of two senior ministers. But the president’s appeal for a cross-party deal in support of the country’s €78bn bailout programme prompted a fresh increase in bond yields on Thursday and hit share prices that had only just recovered from last week’s political turmoil. “Portugal is in a deeper crisis than it was a week ago,” said Ricardo Santos, an analyst with BNP Paribas. “The president sought to ease volatility, but he has almost certainly increased it.” Silva ruled out holding an immediate snap election, saying this would significantly increase the risk of Portugal needing a second bailout. But he called on the three parties to agree on holding an early ballot next June, a year ahead of schedule. Agreeing to Mr Cavaco Silva’s proposal would require António José Seguro, the opposition PS leader, to support €4.7bn in planned spending cuts and the potential laying off of tens of thousands of state workers, measures that he vehemently rejected until now. “It’s difficult to see how the president’s proposal can work given that the concessions involved could end the political careers of both the opposition leader and the prime minister,” said Mr Santos. Portugal was plunged into crisis last week after Paulo Portas, leader of the junior coalition party, resigned as foreign minister less than 24 hours after Vítor Gaspar also quit as finance minister amid tensions caused by government austerity policies. Portugal 10-Year Bond Yield 3.bp.blogspot.com/-BtbUfsrnz6A/Ud8DwPieMvI/AAAAAAAAWYs/qtUoduINpuI/s1600/Portugal+10-Year+Bond.pngMultiple Crisis Genies UnleashedThe coalition in Portugal cannot last and Portugal is 100% certain to need another bailout. With German elections coming up in September, politicians everywhere are scrambling to contain the "Crisis Genie" until after the election. Financial Times writer Peter Wise says Last week’s protests in Portugal show it will not take much to uncork the botle of the ECB’s crisis genie. I suggest more than one genie is already out of the bottle: the spy genie, the Italy genie, the Portugal genie, the EU Banking Proposal genie, etc. Some genies are more powerful than others, but all will help AfD bring an end to the regime of chancellor Merkel in September. For related discussion, please see Germany Election Update: AfD Soars in Online Poll; Is Merkel Toast? globaleconomicanalysis.blogspot.com/2013/07/portugal-uncorks-bottle-of-eu-crisis.html
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Post by jeffolie on Jul 12, 2013 7:05:12 GMT -6
Jul 12, 2013
Portugal 10 Year Government Bond TPI: BX:TMBMKPT-10Y Portugal 10 Year Government Bond
7.46%
Change +0.67% +9.84%
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Post by jeffolie on Jul 12, 2013 17:35:55 GMT -6
Jul 12, 2013 Portugal 10 Year Government Bond TPI: BX:TMBMKPT-10Y Portugal 10 Year Government Bond 7.46% Change +0.67% +9.84% July 12, 2013 Portuguese Stew: 10-Year Bond Yield Spikes to 7.84%; Portugal's President Once Again Pleads for "National Salvation" Agreement
Yield on the Portugal 10-Year Bond soared as high as 7.84% before settling at 7.51%, up a significant 61 basis points. 1.bp.blogspot.com/-vCqiUppxnUc/UeA4Y3zoIBI/AAAAAAAAWZU/gMG-j5_KX5U/s1600/Portugal+10-Year+Bond2.pngPresident Once Again Pleads for "National Salvation" Agreement On account of action in the bond market Portugal President Urges Quick Party Accord. President Anibal Cavaco Silva said he wants Portugal’s two ruling parties and main opposition group to quickly reach an agreement of “national salvation” and implement a bailout program as the nation’s bond yields surge. “Talks between the political parties should be concluded in a very short period of time,” the president’s office said in a statement on its website. Silva met with the party leaders yesterday to explain the terms of such an agreement and all showed willingness to start discussions as soon as possible, according to the statement. “The Socialist Party is available to start a dialogue with all the political parties,” party leader Antonio Jose Seguro told parliament today. The Socialists have ruled out the possibility of supporting or taking part in any government resulting from the current distribution of seats in the assembly and Seguro reaffirmed calls for renegotiating aid package terms. The Socialists have voted alongside the governing coalition on certain key policy decisions including the European Stability Mechanism treaty, the fiscal compact and the country’s budget framework law. The party led Coelho’s Social Democrats by 12 percentage points in a poll published today and has called for early elections. Silva, who has the power to dissolve parliament, said on July 10 that “the start of the process that leads to elections should coincide with the end of the financial aid program” in June 2014. The Social Democrats and the conservative CDS party now have a majority in parliament and the government’s term ends in 2015. Zero Percent Chance Crisis Ends in June 2014 There is no chance the Portugal's financial aid program ends in June of 2014 as purportedly expected. Portugal is going to need another bailout and the bond market recognizes that fact. Interest on the bailout loan is 3.2%. At current yields Portugal would effectively be locked out of regular bond markets to finance its debt. Given another bailout is coming, demand for Portuguese bonds slumped. Pot of Portuguese Stew Recent bail-in talk, for which Germany opposes has likely exacerbated the situation (see German Officials Liken EU Banking Power Proposal to "Nazi Enabling Acts"; What Germany Can Expect; What About the UK?) This pot of Portuguese Stew is about to boil over. Mike "Mish" Shedlock Read more at globaleconomicanalysis.blogspot.com/2013/07/portuguese-stew-10-year-bond-yield.html#sWBvobHHQxqokuSx.99
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Post by jeffolie on Jul 14, 2013 13:24:52 GMT -6
Constitutional crisis pushes Portugal closer to the brink Portugal's borrowing costs have spiked dramatically after key political parties failed to agree on a national salvation front, raising the risk of a snap election and an anti-austerity revolt. By Ambrose Evans-Pritchard 12 Jul 2013 Yields on 10-year Portuguese bonds jumped more than 100 basis points to 7.85pc in a day of turmoil, kicked off by a government request to delay the next review of the country’s EU-IMF Troika bail-out until August. President Anibal Cavaco Silva set off a constitutional crisis on Thursday when he vetoed a reshuffle by the two conservative coalition parties, insisting on a red-blue national unity government with greater legitimacy to see through austerity cuts until mid-2014.
Socialist leader Antonio José Seguro has so far refused to take part, demanding fresh elections to clear the air. “We must abandon the politics of austerity, and renegotiate the terms of our adjustment programme. The prime minister must accept that his austerity policies have failed,” he said. Some Socialist leaders have threatened debt repudiation as a way of fighting back at Germany and the creditor powers, though that is not the party position. Standard & Poor’s downgraded Banco Comercial, and placed a string of banks on negative watch. The agency appeared to endorse warnings that austerity overkill was making matters worse, saying continued fiscal cuts “are eroding the resilience of the private sector”. It said banks were building up a “high volume of problem assets”. Ricardo Santos from BNP Paribas said it was unclear whether Portugal could withstand a further €5bn of cuts ordered by the Troika. “The bottom line is that the policy is not reducing the debt ratio. We think public debt will reach 130pc of GDP in 2014. The country is near the tipping point,” he said. “Everybody has been saying that Portugal is so different from Greece but if this political crisis goes on for long, that won’t be so clear anymore.” President Cavaco Silva has limited powers to force a deal on recalcitrant parties, but experts say it is hard to see how the current government can soldier on after such a blow to its authority. He may have to resort to the “nuclear option” of snap elections, opening the way for a fragmented parliament. Sovereign bond strategist Nicholas Spiro said the events of the past 10 days had left premier Pedro Passos Coelho a “political cripple”, and brought reforms to a “screeching halt”. The crisis was prompted by the exit of finance minister Vitor Gaspar, the chief architect of Portugal’s crisis strategy, who stormed out complaining that he had been undercut by the junior CDS party in the coalition. “Gaspar did make strenuous efforts to curb the budget deficit, but Portugal’s debt ratio kept on rising. There has to be a risk of another macroeconomic calamity on the scale of Greece and Cyprus,” said Tim Congdon from International Monetary Research. Portugal has until now been held up as a poster-child of EMU austerity, praised for sticking to its bail-out terms. Failure at this stage would be a grave indictment of EU strategy itself. It would also force the eurozone to clarify its own crisis policies, exposing deep rifts. Europe’s leaders have vowed never again to force a sovereign debt haircut on banks and pension funds, deeming the experiment in Greece to have been calamitous. This means they may have to violate the pledge or impose losses on their own taxpayers for the first time if Portugal needs debt relief. A study by Eric Dor from IESEG business school in Lille says an orderly debt restructuring by Portugal would cost taxpayers €16bn in Germany, €13bn in France, €11bn in Italy and €7bn in Spain, and twice as much in an EMU exit crisis. “There is a big probability that Portugal will need debt relief, unless you believe in fairytales,” he said. The sheer scale of public and private debt leaves the country acutely vulnerable to deflation. Nominal GDP has fallen in each of the past two years. This has pushed net external debt to a record 230pc of GDP. Portugal’s exports have done well, growing 5pc over the past year, with sales in Latin America, Africa and China making up for the weak picture in Europe. Yet the International Monetary Fund warns in its latest Troika review that the debt outlook remains “very fragile”, with a credit crunch still eating away at small business. Any external shock could push the country over the edge. The Fund said contingent liabilities of the state risk adding a further 15pc of GDP to public debt, and a growth shock could add another 7pc. A “combined shock” would push debt to “clearly unsustainable” levels. The report was written before the latest political crisis, and before the US Federal Reserve pushed up global bond yields by 70 basis points. The shock scenario risks becoming real. www.telegraph.co.uk/finance/financialcrisis/10177055/Constitutional-crisis-pushes-Portugal-closer-to-the-brink.html
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Post by jeffolie on Jul 21, 2013 16:38:42 GMT -6
July 21, 2013 Portugal bailout crisis deepens as unity bid fails SAN FRANCISCO (MarketWatch) — A political crisis in Portugal deepened over the weekend after three of the country’s main parties failed to agree on a “national salvation pact” that was supposed to address growing worries about an international bailout plan, a media report said. President Anibal Cavaco Silva was expected to address the nation late Sunday by unveiling a new approach to the crisis that stemmed from an increasingly unpopular austerity program, according to The Wall Street Journal. Silva could let the weakened coalition stay in power, or call for elections, the report said. Silva had warned that new elections could lead to instability and may hurt Portugal’s chance to exit a 78 billion euro bailout program by June 2014, the report said.
Support for Portugal’s austerity program is seen weakening, highlighted by the resignation of two ministers who stepped down amid growing pressure to ease the program’s impact, the report said. The austerity program has been blamed for Portugal’s unemployment rate, which has risen to more than 17%, according to the report www.marketwatch.com/story/portugal-bailout-crisis-deepens-as-unity-bid-fails-2013-07-21?link=MW_home_latest_news
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