With respect to Portugal, partly due to the notable downgrading of government bonds, concern over fiscal conditions has recently been increased and the yield of government bonds has been hovering at a high level exceeding 15 percent.
As the yields of European government bonds soared, in other words, the prices declined substantially, European financial institutions, which held a huge amount of government bonds on the assumption that they were safe assets, incurred huge losses. As a result, those financial institutions lost market confidence, facing a rise in funding costs and difficulties in funding themselves.