Portuguese government is set to sell 105-day and 168-day bills later during the EU session today. Recently, there have been concerns that the nation will need more money from international lenders in order to avoid default. Portugal, which is in a recession and has been lowered to junk grade by ratings agencies, has recently seen a beating on its debt with the yields sky-rocketing amid rising concerns that it could follow in Greece's footsteps in seeking restructuring.
The market response it gets today from the sale of bills will determine further directions in bond yields. Should the auction be met with lower demand, Portuguese bonds are likely to pare their early week recovery (which has been partly on the back of an upbeat EU summit), which in turn may push benchmark 10-yr yield back towards its recently breached Euro-era high.
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