Welcome aboard Portugal, here is your Ba2 ticket!!
Portugal just took a ride on the sinking ship of EU carrying all the junk bonds which are so heavy that drowning is just a matter of time. Nothing can take Europe out of spiraling debt except the political will to do so but it seems that there is no point of thinking in that direction. It is better to buy junk Greek bond and enjoy a 2-Year return of almost 26% because the spoon-feeding-till-death will continue in Europe. I consider Greece is already dead (financially), it is now a zombie threatening everybody and needing something to eat (bailouts) every now and then. Next to get infected to zombie virus is Portugal. Moody’s have downgraded it to Ba2 which means Portugal bonds are junk too. Portugal is getting ready to ask for a bail out. In the meanwhile, Ireland might need another bailout to survive and by that time Spain and Italy would be ready for their piece of pie.
Rating of Portugal is still better than that of Greece with rating of Caa1. According to the Moody’s there is an increasing probability Portugal will not be able to borrow at sustainable rates in capital markets in the second half of 2013 and for some time thereafter.
Here is what Reuters reported today:
There was a "growing risk that Portugal will require a second round of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a pre-condition," Moody’s said.
Some economists think Ireland may also need additional support, and investors worry Spain and Italy could be next in line for aid.
"It goes to show that this whole crisis isn’t over just yet," said Jay Bryson, global economist for Wells Fargo Securities in Cape Hatteras, North Carolina. "Even if they cough up some more money for Greece, and that looks like it’s a done deal, it’s not over."
Filipe Garcia, head of Informacao de Mercados Financeiros consultants in Porto, said Moody’s move was "a bit extreme" and was likely to exacerbate concerns over Portugal’s debt.
"Either they don’t believe in the power of the political will by the European Union to avoid default, or they are underestimating this political union," he said.