Market ills test Portugal’s resistance
With no sub-prime problems, real estate bubble or complex credit portfolios to worry about, the country’s banking sector should be a relative safe haven. But while investors remain receptive to their covered bonds, banks are finding liquidity scarce. Peter Koh reports.
GRAFFITI NEAR THE Moorish Castelo de São Jorge that overlooks Lisbon’s Baixa district and waterfront bluntly invite tourists who don’t appreciate what Portugal has to offer to go to Spain instead. The writing on the wall is revealing of how the Portuguese find it hard to escape comparison with the only country with which they share a border. The Portuguese economy used to suffer from comparisons with its neighbour, which has enjoyed decades of far faster economic growth. Now, though, the comparison is rather more favourable to Portugal, since it has no real estate or construction bust to worry about.
This is a fact that covered bond investors, if not all tourists, are appreciating.
"The Portuguese covered bond market has actually got a very good image with a lot of investors. The mortgage market has been very moderate in comparison with other markets that have had real estate booms"
"The Portuguese covered bond market has actually got a very good image with a lot of investors," says Ted Lord, head of European covered bonds at Barclays Capital, in London. "The mortgage market has been very moderate in comparison with other markets that have had real estate booms such as Spain, the UK, Ireland, Denmark and the United States.