Wednesday 21 March 2018

Ireland has no difficulty funding itself -- Lenihan

Finance Minister Brian Lenihan. Photo: Tom Burke
Finance Minister Brian Lenihan. Photo: Tom Burke

Finance Minister Brian Lenihan said the Government isn’t facing difficulty raising funds and that the increase in the country’s sovereign-bond yields this week is "normal" before a debt auction.

Asked about a Barclays Capital report yesterday that Ireland may need external aid at some point if conditions worsen, Lenihan told reporters that “what it said was that the Government was taking the right steps at the right time.”

The Finance Ministry said in an emailed statement that there is “no truth in a rumour” that the Government may ask for aid and that it is based on a “local misinterpretation of a research report.”

The premium investors charge to hold Irish 10-year debt over the German equivalent, Europe’s benchmark, widened to a record today.

Economists at Barclays in London said in the report that while Ireland has a “comfortable near-term liquidity position,” it may need to seek external financial assistance at some point.

Lenihan said the Barclay’s report “pointed out that the Government has no difficulty in funding itself, but it did, correctly in my view, signal that we must be extremely careful in how we proceed.”

Record spread

The yield spread between Irish and German 10-year bonds widened to 385 basis points from 356 basis points yesterday.

The spread has risen 67 basis points since Standard & Poor’s downgraded Ireland’s credit rating to AA- on August 24 on concern about the cost of supporting the nation’s banks.

Credit-default swaps on government debt rose 11 basis points to 401.5, according to data provider CMA, close to the intra-day record of 402.5 basis points set September 8.

“Given the comfortable near-term liquidity position of the Irish treasury, we argue that the government does not need to draw on financial assistance from the European Union- International Monetary Fund -- at least not yet,” economists Antonio Garcia Pascual and Piero Ghezzi at Barclays said.

“Yet should further unexpected financial-sector losses materialise or macroeconomic conditions deteriorate beyond our baseline forecasts in the coming months, the Government may need to seek outside help,” they said.


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