Wednesday 17 January 2018

Irish bond yields hold steady despite pressure on Spain and Italy

Spain's rising bond yields have increased fears that the country will need a bailout in future
Spain's rising bond yields have increased fears that the country will need a bailout in future
Sarah McCabe

Sarah McCabe

IRISH bond yields held steady this morning despite declines elsewhere in Europe amid nervousness over emerging markets.

The country’s benchmark 10-year bond yield rose one basis point, to 3.31pc at in mid-morning trade.

But yields in other peripheral European countries like Spain and Italy took a hit following fears that growth prospects in emerging economies may be worse than expected, especially following last week's poor Chinese GDP data, with on-going concerns that emerging market currencies are vulnerable to the Fed tapering its $75bn monthly asset purchase programme.

Spanish government bonds declined for a fifth day as the rout in emerging markets damped demand for the euro area’s higher-yielding securities. Italy’s benchmark 10-year yield, meanwhile, climbed to its highest level in three weeks.

Germany’s 10-year government bonds snapped a two-day gain after a report showed the nation’s business confidence rose for a third month in January. Greek 10- year bonds dropped for an eighth day.

“After Thursdays sell off, the week closed with another flurry of negative activity” said Investec Bank Ireland capital markets expert Justin Doyle. “Global equity markets continued to creak after a terrible US Friday close and a very shaky Asian open this morning - the Japanese Nikkei index recovered after an almost 3pc drop at one stage.”

“Disappointing Chinese ISM data hasn’t helped risk confidence as emerging and commodity driven markets are feeling most of the heat. It will be interesting to see how the markets react this week to an obviously panic driven move and more importantly will the Fed have anything to say on Wednesday evening in relation to recent events” he added.

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