Portugal and the credit crisis

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jdaw1
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Re: Portugal and the credit crisis

Post by jdaw1 » 07:55 Tue 10 Apr 2012


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AHB
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Re: Portugal and the credit crisis

Post by AHB » 09:16 Tue 10 Apr 2012

Would you care to summarise for those of us who don't speak Portuguese?
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Re: Portugal and the credit crisis

Post by jdaw1 » 09:39 Wed 09 May 2012

AHB wrote:Would you care to summarise for those of us who don't speak Portuguese?
The title is a fair summary.

The BBC, in an article entitled [url=http://www.bbc.co.uk/news/world-europe-17998937]Portugal scraps four public holidays in austerity drive[/url], wrote:Portugal has taken austerity measures to a new level with the decision to scrap four of its 14 public holidays.

Two religious festivals and two other public holidays will be suspended for five years from 2013.

The decision over which Catholic festivals to cut was negotiated with the Vatican.

Portugal has already cut public sector wages and raised taxes to reduce its budget deficit and deal with its economic crisis.

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Re: Portugal and the credit crisis

Post by jdaw1 » 10:55 Fri 10 Jan 2014

The Financial Times, in an article dated 9th January 2014 and entitled [url=http://www.ft.com/cms/s/0/9b47af68-791a-11e3-b381-00144feabdc0.html]Portugal enjoys strong demand in debt sale[/url], wrote:Portugal issued €3.25bn of five-year debt on Thursday as a wave of positive sentiment towards the eurozone periphery lifted demand for the placement above €11bn.

The strong demand for Portugal’s debt follows a similar welcome for an offer of ten-year Irish government bonds on Tuesday and marks a successful beginning to Lisbon’s efforts to regain full market access before exiting its three-year bailout programme in June.
!
Bankers close to the deal said orders worth €11.2bn were placed for the sale of Portuguese bonds, in which Lisbon had initially been expected to raise up to €3bn.

The price for the ‟syndicated tap” of an existing bond maturing in June 2019 was set at 330 basis points above mid-swaps, a European pricing benchmark, about 10bp lower than earlier official guidance, the bankers said.
Swaps+3.3% is not bad at all, given what has gone before.

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Re: Portugal and the credit crisis

Post by Miguel Simoes » 16:01 Fri 10 Jan 2014

Still not sure how we'll repay that...

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Re: Portugal and the credit crisis

Post by jdaw1 » 20:29 Fri 10 Jan 2014

Miguel Simoes wrote:Still not sure how we'll repay that...
I suspect that the Agência de Gestão da Tesouraria e da Dívida Pública would prefer that you don’t say that within the hearing of the investors. 

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Re: Portugal and the credit crisis

Post by Miguel Simoes » 23:55 Fri 10 Jan 2014

jdaw1 wrote:
Miguel Simoes wrote:Still not sure how we'll repay that...
I suspect that the Agência de Gestão da Tesouraria e da Dívida Pública would prefer that you don’t say that within the hearing of the investors. 
Thought they were all German

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Re: Portugal and the credit crisis

Post by jdaw1 » 00:15 Sat 11 Jan 2014

As are some of our esteemed friends on this forum.

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Re: Portugal and the credit crisis

Post by AW77 » 01:44 Sat 11 Jan 2014

I won't tell anybody. And please, "don't mention the war". :)
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Re: Portugal and the credit crisis

Post by jdaw1 » 17:24 Mon 13 Jan 2014

[quote="The Financial Times, in an article entitled Portugal plans post-bailout cash cushion,"]Portugal plans to build a substantial cash cushion ahead of exiting its international bailout programme after last week taking advantage of a powerful New Year rally in the debt markets of the eurozone’s crisis-hit ‟periphery” countries.

Lisbon issued €3.25bn in five-year debt in international markets last Thursday, which will cover almost half of the country’s €7bn funding requirements. The remainder would be covered from domestic and retail sources, João Moreira Rato, head of the Portuguese debt agency, told the Financial Times. ‟From now on, we will be focusing on building up a cushion for 2015,” he added.

Mr Rato stopped short of setting a goal for the size of the cushion, however, and pointed out the costs involved in raising funds that were then held on the government’s balance sheet.[/quote]

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Re: Portugal and the credit crisis

Post by jdaw1 » 20:34 Tue 21 Jan 2014

The FT, in an article entitled [url=http://www.ft.com/cms/s/0/af60fd28-8280-11e3-9d7e-00144feab7de.html]Portugal bond yields below 5% for first time since August 2010[/url], wrote:
Portugal’s 10-year bond yield has slumped below the 5 per cent mark for the first time since August 2010 as investors take heart from Ireland’s assured exit from its bailout programme and recent promotion to investment grade by Moody’s.

The yield of Portugal’s bond maturing in 2024 fell 11 basis points to 4.978 per cent, the lowest since the country began to get dragged into the eurozone crisis.

The drop in borrowing costs greatly improves Lisbon’s chances of funding itself independently and leaves its bailout programme on time later this year.

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Re: Portugal and the credit crisis

Post by jdaw1 » 11:58 Fri 28 Mar 2014

The Financial Times, in an article dated 28th March 2014 and entitled [url=http://www.ft.com/cms/s/0/e91c6172-b658-11e3-905b-00144feabdc0.html]Portugal bond yield falls below 4% for first time in four years[/url], wrote:Portugal’s benchmark borrowing costs have slipped below the 4 per cent mark, as investors rush to snap up some of the last remaining “yield” in the eurozone.

Portuguese 10-year bond yields, which move inversely to prices, have been flirting with the 4 per cent threshold for several days, but fell clearly below the level for the first time in four years on Friday, dipping 4 basis points to 3.987 per cent.

The move caps a remarkable turnround from the height of the eurozone crisis, when Portugal’s benchmark bond yield peaked at 17.4 per cent and the country had to be rescued by the International Monetary Fund and its European neighbours.

As recently as last summer, a political crisis sent the yield to 7.5 per cent and sparked concerns that Lisbon would be unable to fund itself in markets and exit its bailout programme on time later this year.

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Re: Portugal and the credit crisis

Post by AW77 » 18:55 Thu 10 Jul 2014

This might be of interest to this thread:
Concerns Over Banco Espírito Santo Rattle Portuguese Investors
http://online.wsj.com/articles/european ... 1404893398

What do our financial experts around here make of it?
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Re: Portugal and the credit crisis

Post by jdaw1 » 20:48 Thu 10 Jul 2014

My guess is that there is a 80% to 85% chance that this blows over without much damage. But a 10% to 15% chance that it snowballs, nastily.

Banking is a confidence game. Mostly, that works well to everyone’s benefit. But if the locals should start to believe that a largest bank of Portugal or Ireland or Spain or Italy might not be able to repay depositors, a run will start and become self-perpetuating. And then other banks will be at more risk.

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Re: Portugal and the credit crisis

Post by AHB » 22:32 Thu 25 Jun 2015

Could our resident economic expert explain to me why a Greek default would automatically (according to the Daily Mail) lead to Greece being expelled from the Eurozone and/or the EU? I fail to understand why a Greek default would be any different to a default by, say, Wokingham District Council. I am fairly sure that if WDC defaulted it would find it difficult to borrow money in the future from anyone other than the Russians and Chinese but would still be part of the UK and would have Sterling as its currency.
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Re: Portugal and the credit crisis

Post by jdaw1 » 22:52 Thu 25 Jun 2015

There is no legal mechanism to expel a eurozone member.

There would be little advantage to Greece in de jure ceasing to be a eurozone member.

But Greek banks can access cash only because they post collateral. Unfortunately, this collateral takes the form of Greek gov’t bonds. If the Greek government were to default, the collateral would be rubbish, and Greek banks would have no access to money. Capital controls would follow. The Greek gov’t might introduce something legally described as a pseudo-currency: this might be new drachma, and might be scrip (promises to pay € later). This new ‘money’ might be legal tender. If something like this were to happen, it could be fairly described as de facto leaving the euro.

Aside: whilst Greece is in terrible difficulties, Portugal’s 10-year bond yields a mere 2.71%. Compare to the 2% Sept 2025 gilt which yields 2.30%.

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Re: Portugal and the credit crisis

Post by TLW » 12:18 Sun 26 Jul 2015

Aside: whilst Greece is in terrible difficulties, Portugal’s 10-year bond yields a mere 2.71%. Compare to the 2% Sept 2025 gilt which yields 2.30%.
Very interesting comparison. Is the UK nearly as risky as Portugal (aside from Portugal's ability to produce spectacular wines)?

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Re: Portugal and the credit crisis

Post by jdaw1 » 12:37 Sun 26 Jul 2015

The ECB has, in effect, a negative policy rate. Hence German govt bonds have negative yield, at least up to about 5 years. Portugal's yields are that plus, simplifying slightly, some default risk.

The BoE policy rate is 0.5%, and expected to start rising within a year. So gilts yield more, but not because of default risk.

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Re: Portugal and the credit crisis

Post by DRT » 19:27 Mon 03 Aug 2015

Wow!Only two weeks ago a Nazi got four years for being an accessory to the murder of 300,000 people. Wow.
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Re: Portugal and the credit crisis

Post by jdaw1 » 18:40 Wed 27 Apr 2016

The FT, in an article entitled [url=http://www.ft.com/cms/s/0/1d347120-0c83-11e6-b0f1-61f222853ff3.html]Canadian rating agency holds key to Portugal’s future[/url], wrote:A Canadian rating agency will decide on Friday whether to maintain or cut off life support to Portugal’s fragile economic recovery.

If DBRS downgrades Lisbon to below investment grade, as Fitch, Moody’s and Standard & Poor’s have already done, the country will automatically be excluded from the European Central Bank’s quantitative easing bond-buying programme, of which Portugal has been a leading beneficiary.

Federico Santi, an analyst with the Eurasia Group risk consultancy, said: “The consensus is that DBRS won’t downgrade Portugal this Friday and a change in the outlook is also unlikely.”

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