Yield on 10-year Portuguese public debt exceeds 4.0%

6 January 2017

The yield on Portugal’s public debt on Thursday rose to over 4.0%, the highest since February 2016 and the ceiling set by the DBRS agency to stop the debt being rated as “junk,” according to data released by financial news agency Bloomberg.

The agency wrote that the yield on 10-year Treasury Bonds traded on the secondary debt market reached 4.014%, thus exceeding the limit set by DBRS that allows the European Central Bank to continue to buy Portuguese government debt.

The rate of 4.014% does not represent the actual cost of funding the State but rather the interest that investors demand from each other, to buy Portuguese government debt but it is an indicator of how much Portugal would have to pay to finance itself if decided to issue more debt.

The rate also has added symbolism because DBRS warned in October that it would have to review its credit rating on Portugal if there was a prolonged period of rising interest rates.

And DBRS’s credit rating is crucial because Portugal uses in order to be eligible for the European Central Bank to buy its debt and to finance banks.

All credit ratings from other agencies – Fitch Ratings, Moody’s and Standard and Poor’s – define Portuguese public debt junk and are therefore not used as a guarantee for State and bank financing. (macauhub)