The interest rate for Portuguese 10 year debt fell today to below the psychological 5% barrier, according to a positive report from Reuters.
The interest rate for 10 year government debt consistently has been over 5% since June 2010 and the new rate will enable Portugal to start to fund its own expenditure at sensible interest rates.
The expectation of compliance with budget targets, the successful last issue of 5 year debt and the removal of part of the negative rating by Standard & Poor's are factors that have contributed to an improvement in international sentiment.
ING bank today advised its customers to buy Portuguese debt due to the expectation that the rating of the country will improve from its current junk status from 2015.
External factors include a renewed international appetite for debt in peripheral countries, an expected general recovery in 2014 and a further stabilisation of financial markets.
Comments
The Portuguese banks have many billions of property loans that have turned bad, are over-valued and will never be paid back.
A lot of peripheral state debt has apparently been 'artificially' bought by European Union banks not private investors - will a domino like fall in confidence in the Banks themselves due to bad property portfolios (like Spain's Bankia) re-raise these state borrowing rates ?