Portugal’s bond yields near 10pc as investors price in EU bailout

PORTUGAL’S cost of borrowing surged to almost 10 per cent yesterday as investors priced in an expected international bailout.

The yield on Portgual’s five-year bonds rose to 9.91 per cent yesterday, higher than the yield on Ireland’s bonds when it was bailed out last November.

Eurozone finance ministers will this week discuss Portugal’s options to solve its debt problems under a caretaker government, including whether it is capable of requesting EU financial aid, a Eurozone source said.

Finance ministers from the 17 countries using the euro meet on Friday in Budapest for informal talks, which will also include the economic situation in other Eurozone countries hit by the sovereign debt crisis – Ireland and Greece.

Given the unsustainably high cost of financing on the market for Lisbon, some Eurozone countries have pressured Portugal to seek a programme of financial assistance from the EU and the International Monetary Fund, like Dublin and Athens have.

But Jose Socrates’ government has repeatedly rejected that possibility, and it is unclear what powers the caretaker goverment would have before new elections on 5 June.