Photo: Reuters
AMSTERDAM (Reuters) - Spain and Portugal are on track to collectively shave at least 17 billion euros ($20 billion) off their debt service costs by end-2022, their crisis-borrowing spree essentially underwritten by the European Central Bank (ECB).
S&P Global Ratings analysis shows the two countries are set to make the saving as their 10-year bond yields teeter on the cusp of 0%, thanks to the ECB's aggressive pandemic stimulus, particularly its bond purchases.
In both countries the yields have fallen 40 basis points apiece this year, a far cry from the 2010-2012 debt crisis when soaring borrowing costs -- in Portugal's case to 17% -- forced the duo to accept multi-billion euro bailouts.
Analysis by Germany's DZ Bank shows the ECB is expected to buy all the new debt Spain's treasury has said it will issue this year, and over 80% of Portugal's.
And if their bond yields fall below zero, effectively charging investors for the privilege of lending them 10-year cash, debt service calculations could be revised down even further.
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