LONDON, Sept 15 Portugal's bond yields shot
higher on Thursday, set for their biggest rise in nearly three
months, after the country's budget watchdog warned of a slowdown
in the economy and a deficit that would miss EU targets.
While analysts cautioned that the move was exacerbated by
thin liquidity, they said the warning raised the prospect of a
ratings downgrade that could make the country's bonds ineligible
for purchase by the European Central Bank.
"Any sort of news like this right now that is to do with
Portugal's fiscal situation is certainly a problem for the
market," Credit Agricole analyst Orlando Green said.
Ratings firm DBRS -- the only agency with an investment
grade rank for Portugal which it needs to qualify for central
bank bond purchases -- is due to review the country on Oct. 21.
Portugal's 10-year yield rose 18 basis points to hit 3.45
percent, the biggest daily rise since Britain's
vote to leave the European Union shocked markets on June 24.
(Reporting by John Geddie, editing by Nigel Stephenson)