There was some respite for Spain and Portugal this week, as both of the embattled euro-area members held relatively successful bond auctions. Analysis of the bond sales can be found at the parent site: “Spain: Unsteady balance” and “Portugal: Hard sell”.
Although benchmark yields in Iberia have had a good week—since Monday, the Portuguese ten-year government yield has fallen by 44 basis points while Spain’s has dropped by 21 basis points—the news coming from the countries’ banks is less encouraging. Still largely shut out from the capital markets, both Spanish and Portuguese banks boosted their borrowing from the European Central Bank last month. Data released this week show that Spanish banks relied on €67bn in funds from the ECB in December, up from €61bn the month before; Portuguese banks, meanwhile, tapped the ECB for €41bn in December, up from €38bn in the previous month.
For Portugal, the Economist Intelligence Unit believes that it is a question of when, not if, the country will seek access to the EU/IMF emergency credit facility (probably during the first half of this year). Spain is expected to service its debt without resorting to a bail-out, although its beleaguered banking sector remains a major downside risk to the sovereign.