These daily movements in the Portuguese long-term interest rates could reflect a risk premium. The EC recommendation clearly signalled to markets that Portuguese public finances were facing difficulties. Therefore, markets might have attributed additional risk to the government debt, demanding a higher interest rate to hold the long-term bonds. At the same time, the risk of private bonds might have decreased relatively to government bonds, since this EC recommendation was not seen as directly damaging this segment of the market. All in all, these movements pushed down, even if temporarily, the swap spreads. This development of the Portuguese long-term bond segment went in parallel with the evolution of the.
