Portugal on list of top ten countries most likely to default on debt obligations

23 April 2010

London, United Kingdom, 23 April – The cost of protection for the potential of Portugal not meeting the obligations on the debt it has issued Thursday reached a new high putting the nation on the list of the 10 countries most likely to default on their obligations according to British company CMA (Credit Market Analysis).

In global terms, Argentina overtook Venezuela to take first place in the list, followed by Pakistan.

A 1 percentage point rise in the credit default swaps (CDS) of US$10 million in five-year debt leads to a rise of $1,000 per year in the cost of securing the default protection.

Investors concerned about the state of Portugal’s public finances have led CDSs on Portuguese treasury bonds to spike over the last few sessions and they are currently the third-highest amongst European countries that issue sovereign debt, behind Iceland and Greece.

Alongside this, the spread – the premium that investors require in order to buy Portuguese rather than German public debt, say – on Portugal’s debt has also risen to all time highs reaching 190 basis points in the case of 10-year Treasury Bonds, the highest level since the creation of the Euro Zone.

Eurostat (the institute responsible for the European Union’s official statistics) Thursday validated the notification made by Portugal in March that reported a budget deficit of 9.4 percent of gross domestic product (GDP) and a public debt of 76.8 percent of GDP in 2009.

Portugal last year had the fifth biggest budget deficit in the European Union, in a list headed by Ireland (14.3 percent of GDP) followed by Greece (13.6 percent), the United Kingdom (11.5 percent) and Spain (11.2 percent). (macauhub)