Spain and Portugal under fire as bond spreads hit record
Borrowing costs for Portugal and Spain have surged to danger levels on fears that Europe’s leaders are losing political control of the Irish crisis and have yet to agree on a coherent plan to tackle the eurozone’s deeper debt woes.
By Ambrose Evans-Pritchard
23 Nov 2010
Yields on 10-year Portuguese bonds jumped to 6.9pc, replicating the pattern seen in Greece and Ireland just before they capitulated and turned to the EU and the International Monetary Fund.
Spreads on 10-year Spanish bonds rose to a post-EMU record of 233 basis points over Bunds, pushing the yield to 4.87pc. Spain’s central bank governor, Miguel Angel Fenrandez Ordonez, said the contagion had spread rapidly to the eurozone periphery and “made itself felt” in the Spanish debt markets. He called on Madrid to accelerate fiscal reforms to persuade the markets the country really means to put its house in order.
“Spain is a bit too big to be bailed out,” said Antonia Garcia Pascual, of Barclays Capital. “The size of rescue required would use up all the funds available and then you have Italy with contagion as well.”