Thursday 29 June 2017

Irish 10-year bond yields open higher following election results

Taoiseach Enda Kenny is to meet with his party leadership
Taoiseach Enda Kenny is to meet with his party leadership
The yield on ten-year Irish bonds rose to 0.9pc, up from 0.891pc in early trading this morning.
Michael Cogley

Michael Cogley

The cost of Irish borrowing was slightly higher this morning following on from the election results.

The yield on ten-year Irish bonds rose to 0.9pc, up from 0.891pc in early trading this morning but dropped soon afterwards as expectations of more quantitative easing measures from the European Central Bank.

The yield on ten-year Irish bonds rose to 0.9pc, up from 0.891pc in early trading this morning.
The yield on ten-year Irish bonds rose to 0.9pc, up from 0.891pc in early trading this morning.

Markets are reacting this morning to the results of this weekend's elections with investors aware of the possibility of a hung Dáil for some time now.

However, experts suggested that yields would rise due to the political instability caused by the general election results and would continue to rise depending on the length of time it takes to form a Government or even to call another election.

The Irish election carries many of the hallmarks of Spain's, where efforts to form a government have been unsuccessful since the nation held its election in December.

It is believed that a long period of political instability will be needed to cause large deviances in Irish borrowing, however that process may be accelerated with a looming Brexit referendum.

Head of fixed-income strategy at Cantor Fitzgerald in Dublin, Ryan McGrath, described the voting at this weekend's election as "indecisive" and not something that encourages markets.

A rise in bond yields pushes up the notional cost of borrowing for the State - indicating how much lenders would seek if the Government wanted to raise new money, but the interest on existing debt doesn't change.

In Portugal, where a left-wing Government was elected in November the cost of borrowing has risen over the past few weeks.

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