With all the compelling news coming out of Libya, the Arabian peninsula and Japan, it’s been easy for investors to overlook the festering sovereign-debt crisis in Europe. But it may come back onto the radar this week, like tomorrow.
Our colleague Min Zeng penned the following missive:
The financial markets are shrugging off the turmoil in Portugal and Ireland today, yet Andrew Brenner, head of emerging markets at Guggenheim Securities, says these two could lead to more volatility in stocks and bonds Wednesday when Portugal’s legislators are scheduled to debate the budget plan. Brenner says Portugal’s main opposition party said they will not support budget cuts so if the budget isn’t passed, Portugal could be forced to ask for funding from the EU. In Ireland, the continued disagreement between Germany and Ireland over corporate tax rates continue to plague negotiation for possible interest rates reductions from the bailout funding for Ireland, he says.
The Journal has a story on Portugal’s budget dilemma. There were reports earlier this week that Portugal’s going to seek a bailout no matter what happens with this vote, but if the measures are rejected, it would force the nation to seek a bailout within a few weeks.
As an indication of how jittery European debt markets are, Ireland’s debt (junior debt, mind you) tanked after after a rumor went through debt markets that Allied Irish Bank missed a coupon payment. The rumors were denied, and the market calmed down, but Ireland’s 10-year bond yield was pushed up to 9.658%. They later fell to 9.278%, for whatever that’s worth.
It’s a good thing the Europeans agreed to that new, permanent bailout fund. They’re gonna need it.