Portugal under stress despite bond rebound

LISBON / Bloomberg

Portugal just can’t shake off its bears. The nation’s bonds are underperforming their counterparts across the euro area even as a recovery in stocks and oil prices boosted demand for higher-yielding assets.
The extra yield, or spread, that investors get for holding Portuguese 10-year bonds instead of the benchmark German bund climbed for the first time in four days. The country’s two-year note yields are more than 1 percentage point higher than those in neighboring Spain, whose leaders have been unable to form a government after inconclusive elections in December.
Portuguese bonds are weighed down by political challenges to austerity policies that were set with the approval of its creditors. That’s diluting the impact of European Central Bank asset purchases that otherwise support bond prices and have pushed down shorter-dated yields across the region, except for Greece’s, to less than or near zero.
ECB President Mario Draghi earlier in the week said the institution will take measures if financial turmoil threatens its policy goals, without being more specific about the options for quantitative easing.

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