Banks

RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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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 […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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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 […]

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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 […]

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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.