Wednesday 21 February 2018

Crisis keeps Government bond yield above 7pc

Donal O'Donovan

Donal O'Donovan

THE price the Government would have to pay to borrow in the markets remained at elevated levels last night -- driven higher by the escalating crisis across the eurozone.

The State has borrowed exclusively from the EU and IMF bailout funds since it was forced to accept the rescue deal in 2010, but Government bonds issued before the bailout still trade among investors on public markets.

It makes it possible to gauge the price lenders might charge if Ireland tried to borrow in the money markets again. The Government plans to return to the markets later this year.

The notional price of borrowing is the best measure of whether or not the country can escape a second bailout.


Last night the "yield" or interest rate on nine-year government bonds -- seen as the standard measure of investor confidence -- was above 7pc for a second day.

The implied price hit a high of almost 14pc last July but growing confidence among investors about Ireland's economic viability had seen it more than halved by last month.

In recent days however, the yield or interest rate has risen sharply and remained above the 7pc level seen as unsustainable by the markets last night.

At that level, the State would have to pay around twice what the EU bailout funds charge for loans if it tried to borrow on the markets. The bailout funds access cash far more cheaply on the markets because they are seen as a less risky borrower.

Irish Independent

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