By Dave Kansas
Things seem a bit quieter on the periphery of the euro-zone, but that doesn’t mean everything is all better. Portugal’s bill auction today provides a stark reminder.
The Portuguese sold 500 million euros of three-month bills. The yield? A whopping 3.4% — which is nearly double the 1.82% it paid for a similar auction in early November.
By comparison, the U.S. is paying 3.4% yields on 10-year bonds – a duration 40 times longer. Bond investors tend to demand higher yield for longer durations. Portugal’s 10-year bond yield is 6.54%, which trails only Greece (11.95%) and Ireland (8.42%) in the euro-zone. Germany pays the lowest yield in the zone at 3.03%.
So, the bill auction tells us that the euro-zone problems remain, even if the panic has subsided for the time being.
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