Italian crisis affects Portugal bonds

The political crisis in Italy has pushed interest rates on Portuguese sovereign bonds to 2.4% – the highest since October 2017.

Yields on 10-year Portuguese treasury bonds (Gilts) are suffering the effects of market fallout from the current Italian crisis as the country faces the prospect of a technocrat caretaker government and fresh elections in the autumn.

Yields on Italian sovereign debt is currently at 3%. Yields on Portuguese debt has consistently been below 2% over the past three months which as enabled the Portuguese State to sell debt on the international markets at thew lowest rates ever.

However, the end of the European Central Bank’s Quantitive Easing programme in September and a general rise in interest rates worldwide – particularly in the United States – added to the uncertainty in Italy has pushed Portuguese bonds over the 2% threshold.

The rise in interest rates on 10-year bonds is unlikely to have a significant impact on public accounts since the Public Debt & Treasury Management Agency has already secured 66% of the State’s spending needs for 2018.