Portuguese bond spreads, CDS narrow as Greek crisis ebbs

LONDON Feb 17 (Reuters) - The premium investors demand to buy 10-year Portuguese government bonds rather than German benchmarks fell on Wednesday while the cost of insuring Portugal's debt also eased as jitters over the Greek debt crisis ebbed.

The 10-year Portuguese/German government bond yield spread PT10YT=RREU10YT=RR narrowed by six basis points on the day to 117 bps, its tightest since Feb. 12.

The Credit Default Swap, cost of insuring Portuguese debt against default within five years, eased to 180.5 bps from 186.1 bps at the New York close on Tuesday, according to monitor CMA DataVision.

It means the cost falls to 180,500 euros from 186,100 euros to protect 10 million euros-worth of Portuguese government bonds.

Other peripheral euro zone sovereign CDS also narrowed.

The Spanish CDS tighened to 132.5 bps from 137.7 bps on Tuesday, the Greek CDS was at 350.4 bps from 359.1 bps, while German CDS was at 44.4 bps from 45.3 bps, CMA said.

Germany held an auction of 7 billion euros of new Schatz bonds earlier, while Spain closed a 12-billion euros order book on a 15-year Bono.

Portugal held a reverse auction for 907 million euros of bonds maturing before May 2011. (Reporting by George Matlock)