Euro Bludgeoned As Portuguese Government Debt Disaster Sparks Credit Default Swap Panic

The Eurozone has become a cluster of sovereign financial explosions lately. The latest burst comes from Portugal.

Portuguese credit default swap spreads hit their widest level ever today in Europe, at 2.26%. This was a huge jump from just 1.96% a day earlier.

Markets appear to have been shaken after the Portugese government sold only 200 million euros of bonds at an auction, vs. an expected 500 million, according to The Wall Street Journal. Portugese stocks plummeted.

And the next PIIGS to drop is…

WSJ: Gavan Nolan, vice president of credit research at index-owner Markit, said there was “panic buying” in the sovereign CDS market. The 10-year yield spread between Portuguese government bonds, or OTs, and German bunds widened briefly to 1.75 percentage point early Thursday, up from 1.43 percentage point at Wednesday’s close, before retreating to 1.55 percentage point. The 1.75 percentage-point level is close to the highest closing level of 1.78 percentage point registered in March 2009. Portuguese spreads have more than doubled this year from .68 percentage point at the end of 2009.

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