Still, Treasury Secretary Carlos Pina said the country did not require an international bailout which the market sees as all but inevitable. “These are rates that are not sustainable in the longer term, but they are still bearable at the moment, which reinforces the need for measures at the European level,” Pina told Reuters in a telephone interview. His comments came just two days before the first of this month’s two European summits, where euro zone leaders will take the next cautious steps in their year-long effort to quell the region’s debt crisis. “We are conscious that the rates remain high and have been worsening, implying a need for an urgent European plan of measures to make the (European Financial Stability) fund more flexible,” Pina said. These measures are likely to be discussed in detail at the European Union summit on March 24-25. He said Portugal was doing what is needed to put its public finances in order and “does not need external help”. The government aims to cut the budget deficit this year to 4.6 percent from gross domestic product after beating last year’s target of 7.3 percent. The yield on the September 2013 bond soared to 5.993 percent from 4.086 percent in an auction last September, also surpassing the 5.396 yield in the sale of a longer-dated October 2014 paper in January. “With yields at these levels this outcome will do nothing to challenge expectations Portugal is heading for a bailout and in somewhat short order,” said Rabobank strategist Richard McGuire.
Bailout signs
Portuguese bonds have been under heavy investor pressure on concerns the country will not be able to avoid following Greece and Ireland in requesting an international bailout. Despite growing investor and peer pressure to request an EU/IMF bailout to ease its debt crisis, Portugal’s government has dug in its heels in resisting such a move, saying it can sustain high bond yields for a while.
Filipe Silva, debt manager at Banco Carregosa in Porto said Portugal’s yield curve was practically flat, with investors failing to determine the premium they should receive for each maturity. “This happened in Greece and in Ireland before the bailouts,” he said, adding though that “we are still not at the levels that require a bailout, but we are quickly approaching these levels.” Portugal has around 4.25 billion euros in bonds maturing in April and around 4.9 billion in June.
