Portugal Five-Year Yields Point to Possible Bailout

From Bloomberg Economic Report:

The surge in Portuguese five-year note yields to record levels is adding to pressure on euro-area policy makers to resolve the region’s sovereign-debt crisis. The yield on the securities has climbed 38 basis points to 7.22 percent since Feb. 11, and is now just 25 basis points less than that of 10-year debt. The increase for shorter-dated debt reflects increasing bailout risks in Portugal following the financial rescues of Greece and Ireland, said Mohit Kumar, a fixed-income strategist at Deutsche Bank. "Both the level and the shape of the curve express a clear no-confidence vote," said Michael Leister, a fixed-income analyst at WestLB. "Everyone is waiting for policy makers and hoping for a solution." EU leaders have given themselves until a March 24-25 summit to craft a package to revive investor confidence. Merkel said yesterday EU leaders will make a statement of "clear political commitment" when they meet on March 11. Portugal will accept a financial bailout "within the next few weeks" as costs to issue debt become unsustainable, said Christopher Iggo, chief investment officer for fixed income at Axa Investment Managers. "The borrowing costs are just too high" for Portugal, Iggo said. "Ireland and Greece had to go for a bailout once their borrowing costs got that high, so Ifully expect Portugal to go within the next few weeks." — Paul Dobson