Portugal Denies Bailout Rumours

10/01/11 -- Under pressure Portugal has denied weekend rumours that it needs an Irish/Greek-style bailout. In a manner reminiscent of earlier Irish denials, of that of a Liverpool vote of confidence in Roy Hodgson, it only looks like a matter of time before the Portuguese are forced to capitulate.

The day of reckoning might come sooner rather than later, with an EUR1.25 billion bond auction lined up for Wednesday this week. Yields on Portuguese 10-year bonds rose to a new euro-era high on Friday. Nobody wants them.

Last week Portugal borrowed EUR500 million at an interest rate of 3.69%, compared to the eurozone benchmark rate of 0.45%.

A poor auction this week would seem to effectively mean that the country has effectively lost access to "normal" borrowing markets and may be forced to go cap in hand to the EU/IMF for assistance.

That would likely prompt further euro weakness in the months ahead as attention then turns to "who's next?" - and most eyes will switch to neighbouring Spain.