Portugal may be in need of a second bailout–or so it seems from its sovereign bond yields, which have risen steadily despite a flood of cash from the European Central Bank that is flowing to other investment targets.
Bloomberg reported that 10-year yields on Portuguese bonds have increased by nearly two percentage points in the past two weeks, and in Tuesday morning London trading had hit 13.85%–up from 7.48% at this time last year. It received a bailout of 78 billion euros ($102.8 billion) in May of last year.
Stuart Thomson, who helps oversee the equivalent of $110 billion as a portfolio manager at Ignis Asset Management in Glasgow, was quoted saying, “The ECB’s cash provides liquidity, but not solvency. If the perception is that a country is already bankrupt, these liquidity measures won’t work. There is growing concern that Portugal may need a second bailout.”
Portugal’s government has been able to continue to issue bills, although it has been unable to sell debt with maturity of longer than a year since its bailout. It plans to re-enter the bond market in 2013, something the International Monetary Fund said Monday it should be able to do, but some experts disagree.