Tuesday 6 December 2016

Wall Street giant deals blow to Irish bond hopes

Emmet Oliver and Donal O'Donovan

Published 26/05/2011 | 05:00

Wall Street giant Goldman Sachs, one of the most influential investment banks in the world, has dealt a blow to Ireland's chances of re-entering the bond market after the company said it was avoiding Irish debt.

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While Ireland is not raising any fresh debt on the markets, it has a number of bonds trading in secondary markets. But so far attempts to engage bigger buyers haven't worked and spreads remain elevated at over 10.7pc.

The National Treasury Management Agency (NTMA) is currently meeting with bond purchasers to try and keep their interest in Irish bonds.

Andrew Wilson, of Goldman Sachs Asset Management, said bonds of Indonesia and Brazil were more attractive than those of Ireland, Greece and Portugal.

He said it was important that Ireland, Greece and Portugal had a "line'' drawn around them to stop the eurozone debt crisis spreading to other countries. However, he admitted that restructuring Greek debt would not mean an end to the euro area.

The bond markets were left treading water yesterday with Greece still the big concern but no hard news to kick-start the markets in either direction.

Irish 10-year government bonds ended the day almost unchanged at a yield, or interest rate, of 10.765pc compared to 10.7pc on Tuesday. Greek and Portuguese government bonds closed slightly down but all three are still offering yields close to all-time highs.

Investors

The illiquid market leaves investors in Greek, Irish and Portuguese bonds with little realistic prospect of selling out of their positions, sapping activity.

"It's hold onto your hat time if you have these bonds, because there's nothing to do but watch and wait," said Brian Barry, an analyst at London-based Evolution Securities.

The calm comes after a week of high-level clashes between the European Central Bank (ECB) and other European officials over whether to restructure the Greek debt seem to have ended with a victory for the ECB last night.

Mr Barry said the earlier volatility came as investors faced a barrage of uncoordinated, unclear and sometimes contradictory comments from the European leadership.

That row started with Luxembourg's prime minister, Jean-Claude Juncker, who became the first major leader to advocate restructuring, which he called "re-profiling."

Yesterday, however, he moved closer to the ECB position and said a "soft restructuring" of Greek debt would not solve Greece's financial problems.

"I think the most important view is still Angela Merkel's position that restructuring will be looked at post-2013," said Mr Barry.

He said the bailouts have always been about taking time away from the markets and the position is still that Greece, Ireland and Portugal have no need to raise money in the near term -- meaning there is little incentive to take swift action on Greece.

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