Bond vigilantes will target Portugal and force the country to seek a bailout within a month, but Spain will not need to turn to its European peers for help, Piers Curran, head of trading at Amplify Trading told CNBC on Wednesday.
“I think Portugal will need a bailout, sooner rather than later,” Curran said.
“I think it’s inevitable. I don’t think they’ve been able to really get (political) reform through quick enough and I think they’re going to suffer from that,” he said.
With Spain highly exposed to Portugal, the bailout should come as soon as possible, he said, adding “I think it will happen in the next month.”
Moody’s said on Wednesday it is considering a possible downgrade of Spain’s credit rating as concerns over its mounting debt persist.
But according to Curran, Spain is in a very different situation to Portugal.
“I do think with Spain, their situation is definitely different. They need to recapitalize the banking system and they’ve allocated funds for that and I think that’s enough money,” he said.
Portugal on the other hand was coming under increasing pressure, Curran said.
Three-month borrowing costs nearly doubledfrom the previous sale in Portugal's last debt auction of the year on Wednesday, reflecting persistent concerns about the country.
“I think the bond vigilantes…will come to the fore. When they (Portugal) go to the debt markets in a meaningful way, yields are going to be too high and I think the bailout will be required,” he said.
Curran said behind the scenes, Portugal is being pressured to go ahead and request a bailout.
“It is important for Portugal to accelerate that process here. We saw it with Ireland, how chaotic it can be with delays, it just escalates the problem,” he said.
German Chancellor Angela Merkel on Wednesday appeared to soften her stance on aid for heavily indebted European peers, saying in a speech that European Union leaders will approve a plan to create a permanent rescue shield for the euro zone when they meet in Brussels later this week.
"We know that the euro is our collective destiny, and Europe is our collective future," Reuters quoted Merkel as saying.
"Nobody in Europe will be abandoned. Europe will succeed together."