Moody’s cut triggers interest on Portuguese debt
- The Portuguese government had planned to place a maximum of one billion euros, but 848 million were sold in three months at an interest rate of 4.92%.
- The Spanish risk premium exceeds 260 points.
Portugal has returned to the markets on Wednesday with the first bond issue of its new government, without reaching the maximum expected , and hours after the rating agency Moody’s reduced its debt to the level of junk bond, decision that lamented the European Commission (EC) for “unfortunate” .
It was planned to place a maximum of one billion euros, but 848 million were sold in three months at an interest of 4.92%, higher than in the previous placement of June 15 (4.86%). The issue came the day after the financial solvency cut lusa anonymous by Moody’s , which fell on Wednesday the Lisbon stock market more than 2.5% and triggered the interest of Portugal’s debt in the secondary market , where the bond to Two years already exceeded 15% and ten years 12%.
Moody’s downgraded Portugal’s note, due to the “increasing risk” that the country will not meet its deficit reduction and have to ask for more help . Market analysts pointed out that the Portuguese Treasury managed to keep the placement below 5% interest , despite to the adverse scenario created by the decision of Moody’s, that under four steps the solvency lusa and put it at the level of the junk bond . They emphasized, however, that the decision of the Treasury not to auction all of the amount envisaged helped not to exceed this psychological barrier.
The agency Moody’s lowered the note of Portugal, by the “increasing risk” that the country fails to reduce its deficit and have to ask for more help, up to Ba2 level, which experts say may cause a runaway of investors and reluctant funds. the risks and financial implications of having assets classified as garbage.
He The reduction in Portuguese debt has led to a fall in European stock markets, starting with the Portuguese, which has opened with a 2.7% drop. In Spain, the risk premium has returned to levels two weeks ago. The risk premium of Portugal rose to 899 basis points compared to the 774 that marked at the close of this Tuesday. For its part, Greece’s risk premium stood at 1,331 from the previous 1,317, while that of Ireland rose to 884.
Spanish risk premium
In Spain, the risk premium on Spanish debt maturing at ten years stood at 264 basis points, with an interest rate of 5.572%, compared to the 254 basis points it closed on Tuesday.
In Italy, this differential with the German bond shot up from 205 basis points to 217 whole, with an interest rate of 5,080%.
At the same time, the Greek risk premium reached 1,381 basis points , with a return of 16.608%, while the spread of Irish bonds remained stable at 889 basis points , with an interest rate of 11.756%.
Complaints from the new president
The cut of Moody’s has been the first to suffer the Executive Luso headed by Prime Minister Pedro Passos Coelho, winner of the early elections on June 5, and whose Finance Minister, Vítor Gaspar, criticized the decision of the rating agency.
The minister complained that Moody’s has not taken into account the extraordinary decisions taken by the Portuguese government to meet the goals of reducing the deficit nor the “broad political consensus” enjoyed by the measures agreed with international organizations.
In the presentation of his government program last Thursday in Parliament, Passos Coelho , whose conservative coalition has an absolute majority, announced that this year an extraordinary 50% tax on Christmas pay will be applied to all workers above the salary. national minimum (485 euros).
The Portuguese government also decided to advance the privatization of public companies and yesterday announced the end of the “gold shares” that allow it to control the large national companies of hydrocarbons, electricity and telecommunications, among other measures to comply with the reforms agreed with the IMF and The EU.