Friday 18 January 2019

Bank shares boosted by bond yields

Traders work on the floor of the New York Stock Exchange. Photo: Reuters
Traders work on the floor of the New York Stock Exchange. Photo: Reuters

Gretchen Friemann

Irish bank shares outpaced the broader market index yesterday, as higher bond yields fed into the increasingly upbeat sentiment towards European financials.

Pillar banks AIB and Bank of Ireland closed over 2pc higher, with the latter at one point surging to over 3pc.

Investec analyst Owen Callan said there is no single catalyst for the higher moves but pointed out a recent rise in European bond yields, of between 3-4 pc, has helped underpin investors' upbeat view of the sector.

AIB closed up at €5.25, while Bank of Ireland climbed to €7.52.

Permanent TSB, bedevilled by its onerous stack of non-performing loans, sank to €1.78 as political pressure threatens to remove split mortgages from its €3.7bn Project Glas sale.

In a note to clients, Goodbody predicted this would deliver a greater hit to the State-backed lender's capital reserves than offloading the restructured loans in a wider portfolio sale.

Meanwhile, sterling weakened 0.3pc to $1.3961, its lowest levels since March 19 as broad dollar strength kept the pound under pressure.

Against the euro, the pound recovered and rose 0.2pc to 87.63 pence.

Britain expressed confidence last week that no hard border with Ireland would return following Brexit.

However, EU negotiators have dismissed a proposal by Britain on how to ensure goods would flow freely after it quits the EU.

Sterling's big losses last week have raised worries for the short-term outlook of the British currency as April has traditionally proved to be a supportive month for sterling due to dividend repayments and a pick-up in capital inflows.

Additional reporting by Reuters

Irish Independent

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