Portugal yields jump on default fears Portugal's bond yields rose sharply on Monday on concerns over the outcome of debt talks with Greece and ahead of a key European Union summit. Yields on 10-year Portuguese debt were trading up 26 basis points to 15.54 at one point, while five-year debt was up 104bp at 21.44 in morning trade. Portuguese credit default swaps rose to record levels, with the market now pricing in a 71 per cent chance that the country will default over the next five years. Negotiations between Greece and bondholders continue to overshadow more positive market sentiment. The recent move by the European Central Bank to offer a €489bn programme of three-year loans to more than 500 of the region's banks, averting a liquidity squeeze, had aided bank stocks in particular over the last few weeks. However, European equities were under pressure on Monday ahead of the EU summit, with the absence of a deal on Greek debt restructuring continuing to weigh on sentiment. Analysts said the market was looking to the Greek bondholder talks as a possible template for future negotiations with other troubled eurozone periphery countries such as Portugal. Earlier this month Standard & Poor's became the last rating agency to downgrade Lisbon to junk. The move by S&P on January 13 triggered a sell-off by funds amid worries that Portugal could, like Greece, be at risk of an imminent default. Elsewhere on Monday, an Italian auction saw yields on 10-year bonds ease to 6.08 per cent compared with 6.98 per cent at the end of last year - the lowest point since October 2011. Italy sold €7.48bn of five- and 10-year bonds, just shy of its €8bn target, in a key test of demand for the country's longer-dated issues after a recent downgrade by Fitch.