Portugal successfully completed a bond auction today, alleviating growing concerns, at least for now, about the nation’s access to the funding markets.
Portugal was able to sell $1.6 billion in Euro-denominated bonds at reasonably acceptable yield levels. The average yield on the longer portion of today’s auction came in at approximately 6.7%, down from roughly 6.8% in the last auction in November. Yields had shot up above 7% in the run up to the bond auction, reflecting the market’s skepticism of the country’s fiscal situation. But purchases by the European Central Bank and announcement by Japan to make purchases had tightenened the spreads.
The auction’s success notwithstanding, the big picture remains unchanged. Portugal’s ability to access the bond markets at an acceptable-enough rate is shrinking. They will most likely need to ask for external help; it’s better they do that sooner rather than later.
On the domestic front, we have the Fed’s Beige book and Import & Export Prices. And with no major earnings announcement today, the overall mood in the market should be positive.
Sheraz Mian
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