Managers fear 'domino effects' after Portugal and Irish debt blowout

Peripheral European nations Ireland and Portugal could be forced to head to Continent's bailout mechanism after their respective bond yields soared to the highest levels since the creation of the euro.

Irish 10-year bond yields are trading at about 8.6%, about 360bp more than the levels seen in August. Irish 10-year bonds are now trading at 630bp over the equivalent German bund. While Portugal, which has seen its bond yields climb to 7% this morning, was able to raise €1.24bn in two bond auctions yesterday, the price action immediately following the auction was negative. Ireland is now trading wider than Greece was earlier in the year, before it tapped the joint EU and IMF emergency bailout package. Schroders, which has no exposure to Portugal, increasingly believes the country i...