Debt restructuring fears grow

Hopes that a Portuguese bail-out would mark a major turning point in the euro-zone’s sovereign debt crisis took a blow last week as comments from euro-zone officials led to renewed concerns about possible debt restructuring in the periphery. This prompted a rise in peripheral sovereign bond yields, with Greek government ten-year yields shooting to a new record high.

In Portugal, the situation has not been helped by the slow progress of negotiations on the country’s bail-out. Nonetheless, it seems likely that Portugal will receive the first tranche of loans from its bail-out package before June’s hefty bond redemption. Meanwhile, the pick-up in Spanish bond yields in the latter part of the week provides a reminder that Spain is not yet out of the woods.