Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

Continue Reading

Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading

Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading

Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

Continue Reading

Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading

Categorized | Capital Markets, Economy

Portuguese 10-year bond yields hit 9-month high


Posted on November 17, 2016

Vulnerable.

Portugal is leading the fresh sell-off in government bonds today, with the country’s benchmark 10-year yield hitting its highest level since market jitters struck in February (the yield falls when a bond’s price rises).

Investors are dumping bonds from the eurozone’s fifth-largest economy and former bailout recipient amid renewed fears about emerging political fragility in the single currency area.

Portugal managed to catch a break last month after it avoided a ratings junking that would have kicked it out of the European Central Bank’s bond-buying programme.

But the country is firmly back in the eye of a market storm, as its high debt levels (130 per cent of GDP) and sluggish growth leave it vulnerable to bond market pressures. The 10-year yield is up 4 basis points today to 3.71 per cent, climbing from the 2.68 per cent low hit in mid-August.

On Wednesday, the European Commission warned Portugal’s 2017 draft budget was at risk of “non-compliance” with its deficit limits, but avoided hitting the government with sanctions that would freeze regional aid to the country.

After a brief morning rally, most European government bonds are falling back today, dragged lower by US treasuries where yields are up 2 basis points to 2.24 per cent. UK 10-year gilts have leapt 3.5 basis points, and Italy’s equivalent maturity bond yield have gained 5 basis points.

Bond markets have been electrified in the wake of Donald Trump’s election as US president, as investors dramatically shift their outlook for higher US inflation on the back of a bumper fiscal injection in the form of expected tax cuts and higher government spending.

Mr Trump’s success has raised concerns about Europe’s insurgent populist movements, with a looming referendum in Italy next month and elections in three of the eurozone’s four biggest economies next year.

Inflation in the eurozone is expected to remain sluggish at below 2 per cent for the next two years, according the European Central Bank. Despite the European Commission recommending a 0.5 per cent fiscal boost to help the eurozone escape a low growth trap next year, a Trumpian fiscal injection is unlikely to be forthcoming in the eurozone.

Germany, the continent’s largest economy has already pushed back against any notion it should carry out higher spending.

“It does not look likely that the eurozone will be fully Trumped any time soon”, said Carsten Brzeski at ING.