Irish bonds lead peripheral debt lower
Irish bonds plunged, leading losses for debt issued by so-called peripheral eurozone nations, on concern the region’s banks may need additional funding.
German 10-year bond yields fell to the lowest in three weeks as the tumbling Irish and Portuguese securities fueled demand for the safest fixed-income assets.
The Government’s cost to bail out Anglo Irish Bank could exceed Standard & Poor’s previous estimate for €35bn, credit analyst Trevor Cullinan said in an interview broadcast by RTE Radio today.
Dutch bonds advanced as the nation sold €1bn of bonds due in 2015 and 2018.
“We have all these concerns regarding Ireland and the banks,” said Michael Leister, a fixed-income analyst at WestLB AG in Dusseldorf, Germany.
“Given that the uncertainties are going to stay quite high, the periphery is going to trade shakily and that’s going to have a positive effect for bunds.”
The Irish 10-year bond yield rose 28 basis points to 6.92pc as of 9:48am in London, the highest since 1997.
The 4.50pc security maturing in April 2020 fell 1.72, or 17.20 euros per 1,000-euro face amount, to 83.43.
The two-year note yield reached 4.76pc, the most since at least 2003, according to Bloomberg generic data.
The yield premium investors demand to hold Irish 10-year bonds instead of benchmark 10-year German bonds reached a record 4.53pc as the bund yield fell 2 basis points to 2.25pc.
The Germany yield reached 2.23pc earlier today, the lowest since September 8, based on intraday prices.
Dutch 10-year bonds rose, pushing the yield 2 basis points lower to 2.45pc. Portuguese bonds slumped, with the 10- year yield increasing 23 basis points to 6.72pc.
German consumer confidence will climb to a three-year high in October, according to GfK AG’s consumer sentiment index.
A separate report today may show the German inflation rate rose to 1.3pc in September from 1pc last month, according to a Bloomberg survey.
German government bonds “are benefiting from strong demand thanks to their safe-haven status,” Viola Stork and Ulrich Wortberg, economists at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in an investor note today.
“This is reinforced by the fact that the German economy is increasingly becoming Europe’s growth driver.”