Wednesday, May 5, 2010

Portugal. Moody's has today put the rating on Portugal debt on negative watch $TLT $EWG

The EUR 110bn aid deal between Greece and the Eurogroup and IMF gave only temporary relief to markets. Investors are far from convinced that Greece will avoid a debt restructuring. The sustainability of the public debt schemes in the other Southern European countries are also getting increasingly questioned by the market.

One big question is if the liquidity concerns will move on to the next "weakest link" in line, Portugal. Moody's has today put the rating on Portugal debt on negative watch - an omen of a eminent downgrade.  Contagion is now popping up outside European markets as well. Widening of the expected FRA/OIS spreads - not only in Euroland but also in the US has continued.

Further, CDS spreads on European banks widened yesterday suggesting that fears of losses in the banking system is increasing.  CEE is increasingly being hit by the contagion.  Bank borrowing at ECB's marginal lending rate (1.75%) was 2.4bn EUR yesterday and 2.6bn EUR the day before - still not worrying levels, but worth following. 


EuropeanDebtCrisisMonitor_05052010

No comments:

Post a Comment