ONCE UPON SOME BOND OFFERINGS

 
 t. man hatter
Once upon a time there were several peripheral countries in the European Union that witnessed some awful days when their economic Humpty Dumpty lost its balance and crashed.

But things got better, so investors were told, as interest rates dropped and from Greece to Ireland to Portugal to Spain any more economic help from their big brothers in Frankfurt and Brussels wasn't needed. To prove their case a couple of them came to the international market after a long absence and sold sovereign bonds.

The ratings on these bonds were like their yield, lower than a duck's belly after lunch. But no matter. Hungry is as hungry does. And investors lined up like the yield-starved lemmings they are, thanks in part to a global group of trusty central bank Svengali.

The end of the tale remains to be unraveled. But some might suggest this was a clear violation of one of the free market's lessor known rubrics, the Cockroach Theory: If you see one, there's bound to be more. 

And that looks like the story today with the big Portugal bank, Banco Espirito Santo, and some apparently irregularities or what is better played down in the crime world as suspect of interest.

All this sparked concerns over another part of the conglomerate – and Portugal's leading bank -- Banco Espirito Santo, with investors speculating that it could be ready to default on its debt. Shares in Banco Espirito Santo were down 19 percent before being suspended by market regulators and Espirito Santo Financial Group dropped 8 percent before also being suspended. 

These concerns rolled over into the wider European equity markets, triggering a sell-off across the rest of Europe. In the debt markets, Banco Espirito Santo bonds continue to underperform, with the knock-on effect on Portuguese government bonds, with the yield on its 10-year sovereign debt moving higher throughout Thursday. Still shuddering at the memory of the euro zone financial crisis, investors sent the yields for other euro zone "peripheral" countries – Greece, Italy and Spain -- higher during the morning session.

To borrow the words of a popular song some time back: "Things got bad, things got worse and I  guess you know the tune, stuck in Lodi again."

Who might get stuck here is one of those who knows. 

Worse case: Though some pundits may claim otherwise, Portugal may be joining Argentina.

http://www.cnbc.com/id/