Some investor behaviour is passing strange. Portugal on Wednesday raised €1.25bn in the bond markets, and investors rushed to buy the shares of European banks. Behavioural economists (not to mention psychologists) will have fun working that one out.

José Sócrates, Portugal’s prime minister, said the auction was “a success from any angle”. Well, from one angle: with your back to the wall staring down the barrel of a gun. True, Lisbon’s 10-year paper is not more expensive now than it was three months ago, though the 6.7 per cent yield looks uncomfortably high. But its three-year paper is certainly pricier: it yields 135 basis points more than in a similar auction in October – to secure just €650m of funding. That represents a sharp rise in the medium-term risk of owning Portuguese bonds.

Viewed in that context, Wednesday’s surge in European banking shares looks bizarre. A 10 per cent rally for Spain’s BBVA and Santander seemed particularly excessive, since Portugal, Spain and the eurozone itself were hardly less vulnerable to further turmoil now than they were earlier in the week. European banks are still in denial about the extent of their exposure to the troubled eurozone periphery, encouraged, perhaps, by the inescapable impression that the