Halister News

(Bloomberg) -- Expect Portugal’s rating at DBRS to stay at IG tomorrow, meaning PGBs will continue to be eligible for ECB QE, Ricardo Amaro, analyst at Oxford Economics, writes in note.

• However, the amount of outstanding eligible bonds means QE support may last only six to nine months, and any downward impact of QE on yields may ebb next year, with yields rising thereafter if there is sustained fiscal slippage
• A slightly more gradual fiscal path and sluggish GDP growth will mean the country’s debt/GDP ratio remains stubbornly high; the state of the banking sector and the huge stock of contingent liabilities also make the economy vulnerable
• The government needs a strategy that supports productivity gains to increase Portugal’s long-term growth potential or the focus on fiscal targets may fail and Portugal’s credit rating may come under renewed pressure