NEW YORK (Reuters) - Portugal has reached a deal on a three year bailout loan with the European Union and IMF, caretaker Prime Minister Jose Socrates said on Tuesday.
GREG SALVAGGIO, VICE PRESIDENT FOR CAPITAL MARKETS, TEMPUS CONSULTING, WASHINGTON
“I think the market has discounted for the moment European debt risk. I think the market’s focus right now is on the U.S. deficit and the course of interest rate policy from the Federal Reserve. The market is focused on what the Fed intends to do and what the ECB is doing. The ECB is currently hiking rates. The Fed, on the other hand, is actually delayed in any course of action that would actually raise interest rates. And that’s what has kept the euro so well-bid against the dollar despite sovereign debt concerns. That should keep the euro above $1.47 at least.
“On the bailout itself? The Portuguese bailout is certainly not good enough. What it is very similar to the situation in Greece last year where it’s simply a band-aid. If you look at the plan that was put in place for Greece, for Ireland, and now Portugal, none of them really addressed the underlying fundamentals, which have caused the problem.”
MARY ANN HURLEY, VICE PRESIDENT OF FIXED INCOME TRADING, D.A. DAVIDSON & CO, SEATTLE:
“This definitely makes sense, they have to do something. Whether these countries avoid default or restructuring remains to be seen, but there are only so many strong hands over there who are contributing to the other deeply indebted nations. Concern over the higher indebted countries in the euro zone continues.”
IAN LYNGEN, SENIOR GOVERNMENT BOND STRATEGIST, AT CRT CAPITAL, STAMFORD, CONNECTICUT
“There was no reaction to speak of from (U.S. government) bonds. The headlines came out but no one really traded on it. It was known information to a large extent and if anything, the news would have been bearish for bonds — and the market’s well bid.”
FOREX: The euro was little changed on the announcement.
BONDS: U.S. government bonds showed little reaction, maintaining the day’s earlier gains.