Cost to Insure Spanish and Portuguese Government Debt Still Rising
November 29th, 2010Via: Guardian:
The cost of insuring Spanish and Portuguese government debt hit record levels this morning as the €85bn Irish bailout failed to calm the financial markets.
An early share rally also quickly ran out of steam, amid fears that the eurozone crisis will spread.
Credit default swaps (CDS) – the contracts used to insure government debt against collapse – showed that the financial markets still had little confidence that some countries would avoid bailout, or default.
The five-year Portuguese CDS – which insures Portugal’s debt until 2015 – jumped by 45 basis points this morning to 545 bps, a record high. This followed an underwhelming auction of €5.5bn of Italian debt this morning.
Nouriel Roubini, economics professor and chairman of Roubini Global Economics, believes that the Lisbon government should seek a rescue deal quickly.
“Like it or not, Portugal is reaching the critical point,” Roubini told Portuguese newspaper Diario Economico. “Perhaps it could be a good idea to ask for a bailout in a preventative manner.”
The Spanish five-year CDS also hit a new all-time high of 350 basis points, up 43bps. Italian, Hungarian and Polish CDS all rose, while the cost of insuring Irish and Greek government bonds against default fell slightly.
