Portuguese bonds slid, pushing the yield on the 10-year note up by the most in 11 months, on concern that the country will fail to curb its budget deficit.

The decline sent the yield on the security to the highest since March, increasing the yield premium investors demand to hold the debt instead of benchmark German bunds to 144 basis points as of 2:40 p.m. in London, the widest in 10 months.

Greek and Portuguese external financing needs are "big," European Union Monetary Affairs Commissioner Joaquin Almunia said in Brussels today. Portuguese central bank Governor Vitor Constancio said yesterday that cutting the country's budget deficit will require "difficult" measures and that the economy is unlikely to catch up with its European peers any time soon.

"The news flow for Portuguese government bonds is rather negative," said David Schnautz, an interest-rate strategist in Frankfurt at Commerzbank AG. "There is a decent upward risk in spread terms for Portuguese bonds. They could go much further."

Portuguese 10-year note yields climbed 18 basis points to 4.65 percent. The 4.75 percent security due June 2019 fell 1.33, or 13.3 euros per 1,000-euro ($1,395) face amount, to 100.75. The two-year yield jumped 22 basis points to 2.43 percent.

Eoin Treacy's view This table of CDS spreads for 40 different countries ranked by absolute values, in descending order shows Greece in third position at 384 basis points (bps) and Portugal in 13th but moving up quickly, advancing 81.4% in the last month and 189% in the last three. Portugal has now overtaken Ireland's spread at 153 bps and continues to accelerate. A downward dynamic is now required to check momentum beyond a brief pause.

In stock markets, Portugal has joined Greece among the laggards and broke back below the psychological 8000 level again today. An upward dynamic is now required to question scope for some further testing of underlying trading.

Spain's CDS spread also surged today and the stock market index pulled back sharply, falling back below 11,000. An upward dynamic is now required to question scope for some further downside.