Portuguese CDS spreads climb after austerity measures voted down

The EU prepares itself for another sovereign bail-out after Portuguese parliament rejects tax rises and budget cuts

Portuguese credit default swap (CDS) spreads have widened to their highest point since early January today, after the government's failure yesterday to secure support in parliament for a new series of austerity measures. The Portuguese prime minister Jose Socrates has announced his resignation, leaving the heavily indebted sovereign on the edge of having to seek bail-out assistance from the European Union's European Financial Stability Facility (EFSF). After closing yesterday at 529 basis points, Portuguese spreads stood at 543bp by 10.00am UK time today, according to information from financial data provider Markit.

Spreads on other peripheral eurozone nations also increased today. In neighbouring Spain, spreads widened from 219bp to 224bp, and in Italy they pushed up from 158bp to 160bp. Greek spreads rose by 7bp to 971bp, while Irish spreads moved up from 608bp to 613bp.

Risk perceptions among some of the eurozone's core nations also increased today – Belgian spreads rose from 144bp to 147bp, German spreads from 46bp to 48bp, and French spreads from 78bp to 79bp. However, in the UK, which could contribute more than €3 billion to the bail-out fund, spreads stayed flat at 57bp.

Elsewhere, risk perceptions on Japan continued to recover from the March 11 earthquake, with CDS spreads moving down 2bp to 101bp. In the Middle East, spreads again stayed fairly steady – Egypt moved down 6bp to 353bp, Saudi Arabia dropped by 1bp to 127bp, and Bahrain widened slightly from 331bp to 334bp.