Portugal Bond Auction Buys Time

Portugal’s debt agency IGCP had said on Thursday that it planned to auction as much as 7 billion in treasury bills during Q2; the country must redeem 4.2 billion euros in bonds in April and 4.9 billion euros in bonds in June. Economists believe that Lisbon has raised enough funding to cover the first redemption, but say that the second may be problematic. As bond yields keep rising, this points the way toward continued financial difficulties for the country, which still has not resorted to asking for a bailout.

In the wake of the resignation of Prime Minister Jose Socrates after the unsuccessful vote on additional austerity measures, the country is being run by an interim caretaker government. That government, according to Finance Minister Fernando Teixeira dos Santos, has neither the powers nor the legitimacy to request and negotiate a bailout. The political crisis engendered by the vote and Socrates’ resignation led to downgrades by ratings agencies, which in turn have led to even higher yields on bonds.