Is the EU Debt Crisis Over?
Absolutely not. However, Portugal’s government sold 1.25 billion Euros of government bonds. Unfortunately, the auctions are sending mixed signals.
Long Term Debt was Cheaper
First, investors have an appetite for Portuguese debt. That’s a good sign. Especially for longer term maturities:
The agency sold €599 million of government bonds due to mature in 2020 at an average yield of 6.716%, down from 6.806% in a November auction. Demand was stronger at Wednesday’s auction, with bids exceeding supply 3.2 times versus a bid-to-cover ratio of 2.1 in the November sale.
That’s good news and a reflection that investors see a light at the end of the European debt crisis tunnel. Now, for the bad news …
Short Term Debt was More Expensive
Jitters for Portugal’s near-term are actually a tad higher:
Portugal sold €650 million of the 2014 bonds, producing an average yield of 5.396%, up sharply from 4.041% in an October auction. The bid-to-cover ratio was 2.6, down from 2.8 in October.
This reflects skepticism that Portugal will get their spending and budgets under control sooner than later.
So, although markets are rubber-necking today’s debt auction, the car wreck is still clogging the highway.
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