LONDON: Euro zone bond markets braced for a number of potentially market-moving events on Friday including a Moody's ratings review of Portugal, a second parliamentary vote of confidence in Spain and US jobs data.
Yields across the region were flat to a touch lower, with Irish yields touching one-month highs before a ratings review by DBRS. Focus was on any implications from the European Commission's ruling this week that Apple should pay 13 billion euros ($14.55 billion) in back taxes to Dublin.
Earlier this week Standard & Poor's said the windfall could help Ireland cut its debt significantly but may undermine the government.
Ratings agency Moody's is expected to review Portugal and Commerzbank says the stable outlook is at risk. Portuguese bonds came under pressure last month after DBRS warned that pressures were building on the country's creditworthiness.
DBRS' view on Portugal is significant because it is the only one of the four agencies recognised by the European Central Bank (ECB) that gives Portugal the investment grade rating it needs to qualify for the bank's quantitative easing scheme.
Any downgrade in Moody's assessment of the outlook for Portugal's rating could fuel concerns about the DBRS rating.
"Even if Moody's view on Portugal's rating is left unchanged there could be some negative comments on the government's fiscal plans and this could fuel speculation about the DBRS decision," said Daniel Lenz, a strategist at DZ Bank.
"We remain cautious about Portuguese bonds."
Portugal's 10-year yield dipped 2 basis points to 3.05 percent, but is about 35 bps above mid-August levels.
Across the euro zone, yields were little changed ahead of Friday's US non-farm payrolls report - seen as key gauge for whether the Federal Reserve raise rates this month.
SPAIN'S PAIN
Spain's 10-year bond yield was steady at around 1.06 percent and on track for its biggest weekly rise since February.
The country, the euro zone's fourth biggest economy, has been without a functioning government since December and a failure to break the political impasse has prompted investors to turn more cautious.
Chances of a third election in a year increased on Wednesday when acting Prime Minister Mariano Rajoy of the conservative People's Party lost a first parliamentary confidence vote on his bid for a second term in office.
A second vote takes place on Friday and a simple majority would be enough to form a PP-led minority government. If Rajoy loses the vote, he has two months to try to form a government before triggering another election -- which could fall on Christmas Day.
"Unlike the previous one, this ballot only requires a simple majority but comments so far from the Socialist leader suggests that his party will not abstain and thus that the vote will fail," analysts at Mizuho said in a note.
Elsewhere, a gauge of long-term euro zone inflation expectations fell to its lowest level since July - highlighting the challenges facing the European Central Bank.
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