PIIGS

The key level of 8 per cent has been rapidly passed today by rising Irish ten-year bond yields. London clearing house LCH.Clearnet has now moved to protect itself from any possible restructure, by making it more expensive to trade Irish debt.

LCH.Clearnet, the world’s second largest fixed income clearing house, said an additional 15 per cent margin requirement would be charged on investors’ net exposure to Irish bonds because of the increasing risk of a sovereign default. It’s another blow, following news that some SWFs were divesting Irish and Portuguese debt. The ECB is apparently buying Irish debt yet again.

Tension rose today following a Portuguese debt auction. Lisbon did sell €686m 10-year bonds and €556m 6-year bonds, less than the guideline range, which was €750-1250m in both cases. (Selling less than the guideline amount has been a feature of Portuguese debt auctions since July.)

Yields, however, were punitive. Lisbon will pay 6.81 per cent Read more >>

The Greek cost of debt has just risen quarter of a point: Greece will repay the markets €300m over six months at 4.82 per cent, up from 4.54 per cent at the last auction in October. The rise takes the Greek cost of debt back up to highs in 2008 (see red spots on chart).

Greece is testing the market, auctioning short-term debt roughly monthly instead of quarterly (see blue bars on chart). Six month and three month bills are still being regularly offered, but there have been no 1, 5 or 10-year bonds since April and no other maturities for even longer.

The timing of Greek debt auctions has been pretty good, to date, raising funds in periods of relative market calm. The secondary market has been wild at times – above 10 per cent – but the maximum agreed yield at auction was a trifling 5.09 per cent in 2008.

This may lend hope to IrelandRead more >>

Poor Portugal. By dint of some dubious acronym, they are lumped into the same category as Greece.

First, a sizeable Greek bail-out, which appears more than adequate, sends European equities tumbling. Second, the cost of debt for the Portuguese government shot up today (6-month government bill average yield 2.955 per cent, versus 0.74 per cent at the last auction in March). Third, Moody’s has just placed Portugal on review for downgrade. Read more >>