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Old 02-10-2011, 02:53 AM   #1

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Default Soaring debt pushes Portugal towards bail-out

Soaring debt pushes Portugal towards bail-out

By David Oakley

Published: February 9 2011 17:58 | Last updated: February 9 2011 17:58

Portugal’s cost of borrowing hit a euro-era high on Wednesday amid growing concerns that Lisbon will have to turn to bail-out funds to revive its stagnating economy.

Hedge funds were selling Portuguese debt after purchasing bonds at a syndication of five-year bonds just 24 hours earlier, brokers said.

Investor worries are also rising that policymakers will fail to introduce the necessary reforms to beef up the eurozone bail-out fund.

Portuguese 10-year bond yields jumped to 7.35 per cent – the highest since the launch of the euro in January 1999 and a level regarded as unsustainable for Lisbon’s struggling economy.

Richard McGuire, rates strategist at Rabobank, said: “Once again we’re back into this lull where they [EU policymakers] have promised something and they haven’t given details. I think the market will become increasingly concerned about this, exactly as they did about packages for Greece and Ireland.”

A leading investor said: “Portuguese debt costs are in danger of rising further and further as there are no buyers of the country’s debt.”
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