Fears grow that Portugal is set to need a second Eurozone bailout

PORTUGUESE bond yields rose yesterday as fears grew that the country may need a second bailout, shortly after Greece had to be rescued for a second time.

German bond yields also rose yesterday to their highest level since early December as investors worried the Greek bailout may still not bring its debts down to a sustainable level.

Yields on 10-year Portuguese bonds rose briefly to 14.243 per cent yesterday – the first time yields have been above 14 per cent since the start of February – before dropping back to 13.516 per cent.

Bond investor Pimco warned in its economic outlook, published yesterday, that it is still avoiding Portuguese debt.

“It is far from clear that Portugal is on a sustainable path,” said fund manager Andrew Balls.

“European governments have been more supportive of Portugal than Greece, but it remains to be seen how an off-track programme will be handled.”

Yields on 10-year German bonds rose to 2.05 per cent yesterday, up from lows of 1.76 per cent just a week ago. The last time yields were above two per cent came in mid-December.