Thursday 22 February 2018

Irish bonds' bounce-back putting some investors off

Emma Charlton and Lukanyo Mnyanda

The strong recovery in Irish bonds is putting some buyers off, because investment returns have fallen so low.

Ireland's longest bond rally since 2005 is making the investment too expensive for some investors.

The extra yield, or spread, over German bonds slid to a three-year low this month as Ireland moved closer to exiting the €67.5bn bailout.

Goldman Sachs Group and BlueBay Asset Management are among the financial companies judging that the yields are now too low for further buying.

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"With the spreads where they are now, we think there are better stories, better places to invest," said Russel Matthews, a fund manager at BlueBay in London, which oversees $56bn (€41bn) and has been putting money into Portuguese and Slovenian bonds.

"We are positive on the story, but from a valuation perspective we don't think it's that exciting."

Ireland's 10-year borrowing costs have dropped to 3.53pc from more than 14pc in July 2011. That compares to 6.17pc for lending to Portugal, whose government is aiming to follow Ireland and leave its own bailout programme next year.

The difference between lending to Ireland compared to Germany has narrowed to 1.69 percentage points, the lowest since April 2010, according to data compiled by Bloomberg.

Ireland would pay less to borrow than Italy or Spain based on current prices.

Irish Independent

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