Portugal has seen its yields explode in recent weeks as the rest of the periphery has pulled out of the danger zone. 10-yr Portuguese debt is up to 17% this morning as the market anticipates that a second bailout will be needed for that nation.
Like in Greece, a too-generous social safety net combined with low worker productivity make it very difficult for Portugal to pull out of the present crisis without very strong economic growth. No one antcipates a major growth rebound in the near-term.
Greek and Portuguese woes are spilling over to the other vulnerably markets today. Italian debt is 21 bp firmer in yield, now at 6.125%. Spain is 10 bp firmer at 4.84%.
