Portuguese bond market rally gathering momentum
Portugal has completely shrugged of a downgrade of its neighbor and yields closed down dramatically today.
Yields fell 43-116 basis points on borrowing out to 15 years. Ten-year yields jumped 60 basis points at the open but closed down 40 bps on the day.
The fall in 3-year yields is especially dramatic today and they’re down to 11.23% from 14% two weeks ago.
To me, it looks like someone (foreign?) is methodically adding to longs on expectations that Portugal will not default.
The inflows alone, wouldn’t be nearly enough to move EUR higher but optimism about the riskiest debt market in the eurozone might be. The move could also be reflecting optimism about a fiscal compact and/or eurobonds in 5-10 years.