Portugal’s Bonds Drop for 3rd Day as Ratings Concern Looms Large

  • Ten-year bond yield rises to highest level this month
  • Fitch Ratings scheduled to issue latest update on Friday

Europe, We Have a Problem

Portugal’s government bonds are again diverging from their euro-region counterparts.

Portuguese 10-year bonds fell for a third day Thursday even as their European peers advanced. The yield rose to the highest this month before Fitch Ratings, one of the major ratings companies which classify the nation’s debt below investment grade, or junk, is due to issue an update Friday. The bonds pared a decline Wednesday after DBRS Ltd., whose BBB (low) grading allows the securities to be acquired by the European Central Bank as part of its quantitative-easing plan, said it was comfortable with the grading.

“Portugal is back in the headlines,” said Marius Daheim, a senior rates strategist at SEB AB in Frankfurt. “The only factor left is the ratings agencies” and the possibility of the country losing its remaining investment grade “is something that is causing nervousness among investors,” he said.

Portugal’s 10-year bond yield rose eight basis points, or 0.08 percentage point, to 2.95 percent as of 11:20 a.m. London time, after reaching 2.97 percent, the highest since July 29. The 2.875 percent securities due in July 2026 fell 0.66, or 6.60 euros per 1,000-euro ($1,132) face amount, to 99.355.

Portuguese sovereign securities handed investors a loss of 0.8 percent in the past week through Wednesday, according to Bloomberg World Bond Indexes. That’s the biggest drop among euro-region government debt.