Portuguese Yields, CDS Hit Record Highs

Yields on Portugal’s 3-, 5-, and 10-year bonds hit record highs this morning and the credit default swaps (CDS) that insure those bonds also posted a record. Expectations are high that Portugal will default on its sovereign debt because the country simply does not have enough time to turn around its economy and bring its debt yields back to a sustainable level.

The yield on a 3-year note rose to 19.43%, while 5-year notes rose to 18.87% and 10-year notes reached 15.10%. By comparison, Germany issued €2.55 billion in 30-year notes at 262 basis points, very near a record low.

CDS rose to 1,326 basis points, which means bondholders pay €1.326 million annually to insure €10 million in notes. At these rates, buyers will be scarce.