Friday 24 November 2017

Ireland bucks trend as yields fall under 10pc

Bond market

Donal O'Donovan

Donal O'Donovan

IRELAND continued to buck the bond market trend last night when borrowing costs fell to levels not seen for months.

Over the past week Ireland's debt has outperformed the rest of the bond market, sparking rumours of a big investor, or investors, placing bets that this country will not default on the loans.

Ireland's yield, or theoretical cost of borrowing over 10 years, fell to 9.96pc yesterday, down a quarter of a per cent in a single day and more importantly continuing a two-week-long trend.

It was the first time Irish bond yields ended a day below 10pc since the start of May and reached the lowest level since April.

Yields fall when the price paid for actual bonds goes up -- lowering the return for investors.

Traders said Irish yields fell yesterday because the European Central Bank (ECB) was in the market buying Irish and Portuguese bonds in the afternoon, putting a floor under prices. That was part of an effort to bolster demand for government bonds in general.

However, traders and analysts told the Irish Independent that Irish government debt was enjoying a rally even before the ECB intervention.

It has led to speculation that a big fund, or funds, has been buying Irish bonds.

Bond trader Ryan McGrath, of Dolmen Securities, told the Irish Independent that Irish bonds started to outperform the market at the end of last week and continued to hold up into this current week in spite of the crisis elsewhere.

ECB chief Jean Claude Trichet yesterday upped the pressure on struggling countries to embrace austerity, insisting that is " absolutely clear" that economies will not recover if they allow budget deficits to continue unchecked. The comments heap further pressure on the Government to make good on its commitment.

Irish Independent

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