Portugal

ISDA’s Determinations Committee will meet at 12pm London time on Wednesday to decide whether Portugal’s Novo Banco has triggered a government intervention credit event, but will also deliberate a succession event in relation to the transfer of senior bonds to Banco Espirito Santo.

The principle of pari-passu among bondholders lays dead and buried. The Bank of Portugal’s decision to select only five of Novo Banco’s 52 senior bonds for bail-in last week has established a new precedent for bank resolutions, and what a fine mess it has created.

The International Swaps and Derivatives Association has accepted a request from investors to rule on whether Portugal’s Novo Banco has triggered a government intervention credit event.

The Bank of Portugal has made an unexpected decision to transfer five of Novo Banco’s senior bonds to Banco Espirito Santo (BES), raising legal questions about how the notes were selected.

Corporate borrowers in peripheral Europe have a golden opportunity to borrow thanks to the ECB’s targeted long term refinancing operation (TLTRO) help for banks – stalling the march towards bond and private placement predominance.

The yield on Portuguese government debt fell on Wednesday after socialist leader Antonio Costa was named prime minister. The new government is expected to bring some stability after several weeks of uncertainty.

European bond markets have shown remarkable resilience to international political tensions this week, but with the US market out on Thursday for Thanksgiving, the primary markets are expected to remain quiet.

CVC Capital Partners sold its last shares in Abertis Infraestructuras, the Spanish toll roads and telecoms infrastructure company, on November 19 in an €818m block trade that gave Bank of America Merrill Lynch’s league table standing a big boost.

Investors gave a firm thumbs up to a capital hole at Novo Banco identified by the European Central Bank this week, as the debt of the Banco Espírito Santo ‘good bank’ joined a wider rally in Portuguese bonds.

Investors are expressing optimism about the results of the European Central Bank’s stress test of Novo Banco — the so called good bank set up by regulators after the collapse of Portugal’s Banco Espírito Santo last year — despite the headlines that the regulator will require the bank to raise €1.4bn in capital.

The European Central Bank has identified a €1.4bn capital shortfall at Portugal's Novo Banco, but analysts say the results are positive for the bank’s bondholders.

Political risk appeared to be influencing investors’ decision making on Monday, as a trio of eurozone periphery sovereigns underperformed their peers in secondaries. But there was better news for Cyprus, which more than halved its one month borrowing costs at an auction.