July 4 - An early rebound in Portugal's bond yields as attempts were made to defuse a political crisis was short-lived. And as Sonia Legg reports there are other factors also making investors nervous about the prospect of a revived euro zone crisis.
The morning rebound didn't last. Attempts by Portugal's government to defuse a political crisis clearly hadn't reassured enough. Five year Portuguese bond yields jumped to 7% with 10 year ones even higher at 7.5% Rui Barbara is an Asset Manager at Portugal's Carregosa Bank. (SOUNDBITE) (English) ASSET MANAGER OF CARREGOSA BANK, RUI BARBARA, SAYING: "If it's prolonged in time it can do a damage that eventually delays Portugal going to the normal markets that is supposed to start happening in the second half of 2014 but well I think things will tend to resolve in terms of political and I think, I don't know until the end of the year at most." Portugal was on course to exit its bailout next year. But the resignation of two ministers this week raised the prospect of a new election and a regime which may not be so committed to austerity With the troika in Athens assessing Greece's latest efforts nerves have been jangling. But Commerzbank's Peter Dixon believes Portugal isn't as dangerous. SOUNDBITE: (English): PETER DIXON, EUROPEAN ECONOMIST, COMMERZBANK, SAYING: "Portugal is one of the peripheral economies which has a relatively small weight in the grand scheme of things because it doesn't have a big banking sector like Ireland and it is not as indebted as Greece. So whilst the situation is very serious, and investors who are looking to hold Portuguese bonds are eyeing the situation very nervously, I don't think it has the potential to de-rail the euro zone in the way that Greece or even Ireland has had during the course of recent years." There was some relief that Spanish bonds sold easily - albeit at a higher rate. But the next few days will prove crucial. Euro zone leaders are meeting on Monday and we'll find out then if Greece has done enough to earn its next bailout instalment. One collapsing government may not have re-awakened the debt crisis but two might set off an alarm that's hard to ignore.