Wednesday 17 January 2018

Government sells bonds as debt-crisis pushes up yields

Louisa Fahy

The government sold €1.5bn of debt at an auction as the cost of borrowing for the Euro-zone's so-called peripheral nations continues to rise.

The government sold €750m of 4.5pc debt maturing in 2018 to yield 5.09pc. That compares with a yield of 4.55pc in August, when it last sold that debt. It also sold €750m of 4.6pc six-year bonds to yield an average 4.521pc. That’s higher than the 3.663pc yield at the previous auction of those bonds in April.

The National Treasury Management Agency in said investors bid for 3.1 times the 2016 securities offered and 2.9 times the 2018 debt.

Greek, Spanish and Irish bonds fell today relative to benchmark German bunds after Greece’s credit rating was cut to junk by Moody’s Investors Service. While European leaders last month unveiled a €750bn rescue package for indebted nations and governments pledged tougher austerity measures to tackle budget deficits, the measures have yet to calm markets.

The premium investors charge to hold Irish 10-year debt over the German equivalent widened 18 basis points to 282 basis points today. It reached 306 basis points on May 7. The Spanish yield premium widened 4 basis points to match a euro-era high of 208 basis points, while the Greek premium jumped 36 basis points to 606 basis points.

Greece is also rated junk at Standard & Poor’s. Ireland has an Aa1 rating at Moody’s and is AA at S&P, one level below the top investment grade.


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