European peripheral debt is under attack. Yield on the Portuguese 10-year bond yield spiked as high as 4.425% from a low of 3.532% earlier today. Yield is up from 2.654% in January.

Portugal 10-Year Government Bond

Portugal Bears Brunt of Bond Selloff With Yield at 2014 High

Bloomberg reports Portugal Bears Brunt of Bond Selloff With Yield at 2014 High.

Portugal's 10-year bonds plunged, pushing the yield to the highest level since the country exited its bailout program in May 2014 and adding pressure on Prime Minister Antonio Costa less than three months after his minority Socialist government took office.

The European Commission last week told Portugal to adopt measures to ensure its 2016 budget complies with the provisions of the EU's stability and growth pact, while stopping short of rejecting the plan. The government already had to provide additional measures worth as much as 845 million euros ($957 million) to the Commission after submitting the initial draft of the budget on Jan. 22.

The rise in yields isn't linked to the discussion on the budget, Minister of the Presidency Maria Marques told reporters in Lisbon on Thursday. “This instability isn't related to particular circumstances as the budget was approved by the European Commission and this is just a coincidence in terms of timing,'' Marques said.

Portuguese debt led Thursday's selloff among peripheral nations in the euro area, with Italian, Spanish and Greek bonds also dropping.

Portugal Debt-to-GDP

Does anyone really believe Portugal can pay that back under existing eurozone rules?

Deflation Fighting Madness

It's totally crazy but ECB president Mario Draghi strives to hit an inflation target of “close to but not exceeding 2%”. The market now expects Draghi to cut the ECB's rate further into negative territory in March, even though negative rates are decidedly bad for banks.