Cost of borrowing plunges to 8.55pc
Published 03/12/2010 | 05:00
IRELAND got a major boost yesterday when the State's cost of borrowing on the open market plunged in a matter of hours.
The drop -- from 9pc to 8.55pc -- came after ECB president Jean-Claude Trichet said the ECB would continue buying debt owed by weaker eurozone governments to calm the international markets.
The ECB buys debt that private investors are too nervous to purchase, bringing down the yield -- the interest charged.
After Mr Trichet's remarks the cost of borrowing fell in Ireland, Portugal, Spain and Italy.
Portugal's cost of borrowing fell dramatically, from 6.731pc to 6.177pc. Spanish and Greek yields also fell.
The ECB began buying the government debt in May. It has spent €67bn so far buying the government debt but most of the purchases were made last summer. The level of ECB buying was just €1.5bn last week.
The dramatic fall in Ireland and Portugal's debt prices prompted speculation that the ECB was actually buying debt during Mr Trichet's press conference. If true it was a bold illustration of the renewed level of commitment to calming the markets.
The ECB does not comment on individual purchases but traders said Portuguese bonds were being targeted by the bank yesterday.
Market observers were hoping for a major announcement from Mr Trichet after statements earlier in the week hinted at a shift in ECB strategy.
Without new measures the market will concentrate instead on the size and amount of government debt the ECB will buy.
Meanwhile, the European Financial Stability Facility (EFSF) will borrow between €5bn and €8bn from the bond market in January and lend the money on to Ireland under the EU/IMF bailout package, a spokesman for the fund said last night -- as first reported by the Irish Independent on Tuesday.