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Monday, March, 14 2011 - Weekly e-Newsletter & Commentary - Issue No. 450

Portuguese Debt
Global Futures
E-Mini FuturesPortuguese 10-year bond yields slid from a record intraday rate of 7.70% after market rumors that the European Central Banks was checking bond prices. The central bank has in the recent past purchased debt of various EMU nations in an effort to restrain rates.

The generic 10-year yield closed at 7.629% in European trading. Earlier in the day the Portuguese government sold 1 billion euros of two year securities maturing in September 2013 at yields almost 2.0% higher than similar bonds fetched last September. The bond paid 5.993% today and had paid 4.086% at auction last year. The bid to cover ratio was 1.6 today and 1.9 in September. The yield on the 10-year security is 343 basis points higher on the year and 174 in six months.

Other EMU yields were also pressured higher by a sovereign debt market concerned that Portugal will be the next EMU country forced into a bailout. The Greek generic 10-year bond closed at a record 12.9%, up six basis point on the day and just below the 12.924% intraday high. Spanish 10 year rates ended 3 points higher at 5.511%, as did Italian yields at 4.99%. Irish 10-year rates fell slightly to 9.55% from 9.572%. German 10-year debt fell 1 basis point to 3.29%.

European Union leaders are set to meet in Brussels on March 11th to settle plans for turning the European Financial Stability Facility (EFSF), the temporary fiscal mechanism that has been used in conjunction with the IMF to bail out Greece and Ireland, into a permanent institution. The completed agreement is expected to be announced at the EU summit on March 24 and 25.

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