Ahead of Wednesday's auction of Portuguese bonds finance minister
Dos Santos has publicly stated that the will be doing all possible to
avoid an official bailout by the E.U. Despite his this rhetoric
investors have driven yields to record highs of 7.21%, higher than
the 7.18% hit yesterday before 'aggressive' buying by the ECB.
Current events are reminiscent of the build up to last year's
bail-outs of Ireland and Greece. With yields at unbearable levels the
markets are primed for risk aversion flows out of the Euro.
EUR/USD broke a 4 day decline in yesterday's session; however, the
bounce was failed to find the support to drive it beyond the 1.3000
handle indicating the bearish sentiment remains in place. The brief
relief rally from the 4 month lows against the dollar and yen may
offer a better opportunity to sell the single currency.
Investors are awaiting for the result of Wednesday's auction. Price
as declined from 1.3400 to 1.2900 in the first 2 weeks of trade. A
poor demand, coupled with excessive yields could add further weight t
the Euro crosses. Is has been reported that since the key 7% yield was
reached on Irish and Greek debt the countries were bailed out within a
month. If history repeats itself the Portugal is well on its way to
requesting financial aid. Adding to the urgency is Portugal's
requirement to re-finance a significant proportion of it's debt in
the near future.
Source: Fxstreet.com
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