Portuguese bond hits new high despite coalition deal

Despite the new government's success in forming an anti-crisis coalition, interest rates on Portuguese debt in the secondary market continued to escalate, especially on 10-year bonds, which on Friday exceeded 11 percent for the first time in Portugal's history.

New Portuguese Prime Minister Pedro Passos Coelho on Thursday announced the agreement that creates a center-right majority after six years of Socialist rule, saying that although the task ahead was daunting, the coalition would lead the nation through the change it demanded.

Passos Coelho, leader of the conservative Social Democrat Party and Paulo Portas, leader of the center-right Democratic and Social Center party signed the agreement in a hotel in Lisbon. The two will form the pillars of the new government, which will take office next week.

Still, markets failed to respond to the announcement. Events on Friday were just the latest in a series since January that have seen the markets exerting increasing pressure on the debt-stricken country. In January, interest on 10-year bonds rose above seven percent for the first time. They had jumped to eight percent by the end of March, rising again to nine percent by mid-April and reaching 10 percent by early June. This is despite a Brussels and IMF-backed 78-billion-euro rescue package that was approved in April for Portugal.