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9 Jul 2013
Flash: Portuguese quagmire steadies – Deutsche Bank
FXstreet.com (New York) - In the European rates market, Portuguese 10yr bonds rallied 20bp to close below 7% for the first time in almost a week, notes Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank.
This followed the weekend's news that PM Coelho had managed to salvage the coalition, but as DB's Gilles Moec highlights, it came at a high political price. Indeed, CDS-PP leader Paulo Portas accepted to rescind his resignation from government to become officially vice-Prime Minister (a function last used 30 years ago) and more crucially will be overseeing economics and government reform as well as the relationship with the troika.
Gilles believes that while the market may welcome this as a first step to lesser political uncertainty, it does create problems both externally (the government's relationship with the Troika) and internally (coordination with the "harder line" Finance Minister). Gilles continues to think that the Europeans need to find a solution to fund Portugal after 2013 to allow it to continue the adjustment away from immediate market pressure.
This followed the weekend's news that PM Coelho had managed to salvage the coalition, but as DB's Gilles Moec highlights, it came at a high political price. Indeed, CDS-PP leader Paulo Portas accepted to rescind his resignation from government to become officially vice-Prime Minister (a function last used 30 years ago) and more crucially will be overseeing economics and government reform as well as the relationship with the troika.
Gilles believes that while the market may welcome this as a first step to lesser political uncertainty, it does create problems both externally (the government's relationship with the Troika) and internally (coordination with the "harder line" Finance Minister). Gilles continues to think that the Europeans need to find a solution to fund Portugal after 2013 to allow it to continue the adjustment away from immediate market pressure.