- Could the ECB's OMT be used to buy Portugal now?
No - we don't think so even though the ECB's guidance on this has been a little blurry. To be eligible for OMT, a country must be 'regaining bond market access'. Even though Portugal has printed twice this year we dont think this is enough to qualify Portugal as being eligible for the OMT.
- Are there other backstop facilities that could be activated now?
Yes. It is possible to activate ESM's Secondary Market Support Facility (SMSF) to buy Portuguese bonds. This facility has so far not been used. Portugal would qualify for the ESM secondary market purchases as the country is already under an adjustment programme.
- What do you expect the ECB will do?
Verbal intervention has so far been Draghi's preferred tool to calm the markets. We expect Draghi to repeat the message that 'the OMT is even more essential now' at tomorrow's ECB meeting.
- Is Portugal in need of market access at this stage?
No, from a funding perspective Portugal does not need to access the market again this year.
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