Italy causes the Portuguese interests to rocket to maximums of October

  • ECO News
  • 29 May 2018

Portuguese debt interests increase, affected by the political tension experienced in Italy. The Portuguese ten-year rate is standing at maximums of seven-months.

Italy’s politics are not doing so well, and that is being reflected in a worsening of the Portuguese sovereign debt yields. The ten-year interest rate for Portuguese bonds has hiked to maximums of October of last year, after having surpassed the 2% threshold in the previous session. The worsening of the risk perception is also causing the Portuguese credit default swaps (CDS) to skyrocket.

The Portuguese sovereign yield for ten-year maturities worsened around 33 basis points in the secondary market, to 2.234%, which corresponds to the highest threshold since October 26 of last year. Other maturities are having a similar behavior.

The Portuguese debt is walking hand in hand with its Italian equal, whose sovereign yields worsened especially in shorter maturities. Italy’s two-year sovereign debt worsens 90 basis points to 1.937%, the highest since 2013, according to Reuters. As for the ten-year maturity, the increase is of 24 basis points to 2.93%, the highest percentage since mid 2014.

The Italian sovereign debt interests increased again after, this Monday, the former IMF director for fiscal matters, Carlo Cottarelli, accepted to form a Government in Italy. However, both the leader of the 5 Star Movement and the League — parties who had reached an agreement to form a government coalition — stood against the Italian President’s choice. It is now expected that Cottarelli will not move forward in Parliament, opening the doors to early elections, most likely in the beginning of 2019.

In addition to pressuring the course of European stock markets and worsening the sovereign debt interests, the markets’ fears are also being reflected in an increase in the credit default swaps (CDS) of peripheral countries — that is to say, the cost of assuring debt. This morning, the Portuguese five-year debt CDS increased 15 points, to the highest threshold of almost seven years.