Portuguese yields dropped substantially today after a solid one-year bill sale. In Spain, other the other, hand borrow costs rose 10-20 basis points across the curve.

10-year yields are well below the crisis highs but back to the highest since Feb. and there is a similar move in Italian bonds.

A few factors have been cited for the rising yields:

  1. a thinktank report suggesting the ECB could drain excess liquidity later this year
  2. Citigroup’s chief economist saying Spain at greater risk of restructuring than ever before
  3. I haven’t heard this one today, but yesterday I read something suggesting that it took 3 weeks after the first LTRO to rebalance portfolios, afterwords the benefits began to recede. Today is exactly three-weeks since LTRO2.