Portuguese yields had got low enough to suggest we were a long way from the bailout days of 2011-2014. While it's been a bad few months for bonds around the world, Portugal's are showing particular strain. Recent developments justify concern about Portugal's ability to depend on support from the Troika of the European Central Bank, European Commission and the International Monetary Fund. The government is doing itself no favors by straying from the austerity path. Portugal was the poster child for fiscal tightening during its three-year stint in intensive care, under the previous center-right government. The hard work paid off, as seen in the plunge in bond yields.
Portuguese bonds have widened 150bps to Germany since the summer. Trapped in its 232 billion euro ($248.2 billion) debt vortex, what has kept Portugal out of trouble is its adherence to the Troika’s demands for fiscal discipline. Its economy is one of the smallest in the euro zone, so the government just doesn't have scope to threaten officials with recalcitrance, as Italy can. While the ESM has plenty of funds to underwrite Portugal’s debt it would balk at allowing it to slip back into emergency measures.
The timing could not be worse as Portugal has bumped up against the ceiling of the ECB’s 33 percent issue and issuer limits for its Public Sector Purchasing Program. Ireland is in the same boat, as Gadfly's pointed out. Central bank purchases have been crucial in driving down Portugal’s bond yields, but instead of the 1.4 billion euro monthly pace that's allowed by program rules, this has dropped to 700 million euros in December and will likely fall further to a 440 million-euro pace. Portugal’s support mechanism is being taken away from it while it very much still needs all the help it can get.
segunda-feira, 30 de janeiro de 2017
Reverter e afundar...
O blogue Gadfly da Bloomberg tem um post sobre a dívida soberana portuguesa. Aqui vai um pedaço, mas vale a pena ler tudo.