Markets take this as Lenihan's definitive stance
Published 01/10/2010 | 05:00
THE markets finally accepted that senior Anglo Irish Bank bonds will be protected under state ownership -- but holders of subordinated bonds were left wondering how and when the Finance Minister will try to strike a deal with them.
Legislation to impose discounts on subordinated bondholders will not apply to AIB. While subordinated bonds will suffer further losses, they were only slightly weaker yesterday.
One distressed debt trader said the €2.4bn of subordinated bonds was "treading water in the mid-20s".
Meanwhile, senior Anglo bond prices rose after the minister reiterated that senior bondholders of any Irish institution would not have losses imposed on them. However, he insisted that cash-strapped financial institutions could open negotiations with senior bondholders.
Mr Lenihan said discussions could take place if they were of mutual advantage to both parties -- but said the bondholders could not be coerced into talks.
Analysts and traders last night said the announcement was being taken as the definitive word on the issue. Senior bonds rose from recent lows to just under 90 cent in the euro.