Portugal and Spain set to test appetite

The Eu110bn bail-out package for Greece has failed to stop the rot and contagion is rife in southern European fixed income and equity markets. Bankers believe the market is calling for the European Central Bank to start buying government bonds. Interesting tests for government debt appetite are on the horizon this week: a T-bill auction from Portugal today and Eu4.5bn of five year and possibly 30 year debt by Spain on Thursday. Meanwhile the new issue market is dead in the water although the supranational and agency sector is holding up well, with issues being marked only slightly wider. Read EuroWeek on Friday for the latest news and views on what could bring a halt to the crisis.