The good news is Greece won’t default on March 20, and 10-year borrowing costs for Spain and Italy have dropped below 5 percent. The bad news is similar-maturity Portuguese bonds still yield more than 13 percent.
Last week, Greece pushed through the biggest sovereign restructuring in history, with private holders forgiving more than 100 billion euros ($131 billion) of debt, a condition for the nation to win the bailout it needs to repay 14.5 billion euros of debt coming due next week.
“The market doesn’t believe that Greece is a unique case,” said Regesta. “Portugal is very similar. It would be easy to try to placate and distract the attention of the bond vigilantes, if only policy makers would immediately close the funding gap, pre-empting any further pressure on the periphery. I’m afraid I don’t think that’s going to happen.”