Portugal’s borrowing costs fall but second bailout looms

A sharp fall in Portugal’s borrowing costs has taken them closer to those of exemplary Ireland than of struggling Greece, but bond prices show investors remain sceptical it will be able to avoid a second bailout.

Portuguese bond yields have fallen sharply from euro-era highs hit in January as fears it would follow Greece in restructuring its debt eased after the government introduced sweeping austerity measures.

Short-term yields are again lower than those for borrowing over longer periods, reversing an abnormal inversion of the yield curve that lasted from Mar 2011 until last month and reflected investor expectation of a near-term default.