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Dragão Porto Comments On Portugal's Borrowing Costs Soar As France Passes First Bond Auction Test

Portugal's borrowing costs jumped to record highs on Monday, as investors had their first chance to react to a series of downgrades by Standard and Poor's (S&P) that saw the country relegated to "junk".

 
PRLog - Apr. 12, 2012 - PORTO, Portugal -- Portugal's borrowing costs jumped to record highs on Monday, as investors had their first chance to react to a series of downgrades by Standard and Poor's (S&P) that saw the country relegated to "junk". Yields on benchmark 10-year government bonds rose nearly 2.3pc, or 228 basis points, to 14.198pc in afternoon trade. The difference between Germany and Portugal's borrowing costs also widened to record highs of 1,243 basis points, following S&P's downgrade of Portugal to below investment grade. Dragão Porto is a successful sales and marketing company based in Porto and is concerned about Portugal’s borrowing with a source saying, ‘in times like this the Portugal government has to be wise about their spending.’

The spike in Portugal's borrowing costs came as France sold a range of short term debt in an auction that saw borrowing costs largely fall, although demand waned slightly. Friday's downgrade also saw the cost of insuring Portuguese debt against default rise sharply amid a day of fairly muted trading in the credit default swap (CDS) market. Portugal CDS spreads widened 42 basis points to 1,125, compared with a one basis point rise for France and fairly flat trading across the rest of Europe, according to Markit. This means it now costs £1.125m to insure £10m of Portuguese debt.

In a statement on Friday, S&P said: "We believe there are significant risks to Portugal's external financing over the next two years as creditors of its private sector, primarily other eurozone banks, are likely to reduce their exposures to Portugal more rapidly than previously anticipated, partly due to uncertainties on the EU's future crisis management policies." Dragão Porto agrees with this point of view with the Managing Director of Dragão Porto saying, “every action has a reaction, so careful thought needs to be given when making decisions like this.”

S&P added that Greece's debt restructuring woes could deter potential investors from placing their money into Portugal, which was forced to accept an €78bn IMF/EU bail-out last year.

On Sunday, Portugal condemned S&P’s decision as “ill-founded” and difficult to justify, given its efforts to more than halve its 2011 budget deficit to "around or below 4pc" - which it said was well below its agreed target of 5.9pc. Some of the country's efforts to meet its deficit targets have proven controversial. In December, Portugal agreed to transfer €5.6bn of assets from four of Portugal’s biggest banks to boost the state's balance sheet. The Bank of Portugal has forecast GDP growth to shrink by 3.1pc in 2012, compared with previous estimates of a 2.2pc contraction. Dragão Porto has experienced amazing success in the short time they have been open and they attribute this success to careful decision making and planning. ‘With what is happening in the economy it is clear that things are changing and sometimes not for the best. This is why every decision is analysed and then triple checked as one foot wrong in times like these could mean the end of your business. Luckily we have developed and fine-tuned our marketing systems so success for our clients is imminent,” continues the MD of Dragão Porto.

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Na actual economia competitiva, as empresas buscam estratégias inovadoras de marketing para garantir a visibilidade da suas marcas e ao mesmo tempo a maior penetrabilidade de seus produtos ou serviços no mercado.

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