Saturday 25 November 2017

Irish bonds buck downward price trend

Debt

Donal O'Donovan

Donal O'Donovan

IRISH government bonds are bucking the latest weakness in European debt markets, with 10-year borrowing costs now close to 10pc for the first time since June 20.

The yield on Irish government debt dropped below that for Portugal's yesterday -- a sign investors are slightly more optimistic about Irish longer term prospects.

Irish bond yields are still three times what the country has to pay under the revised bailout deal. There is no prospect of a return to the markets without a massive and sustained fall in bond yields.

The trend is moving in the right direction, however. Irish 10-year bond yields have fallen from a high of 13.8pc before the European leaders' summit on July 21 to 10.39pc yesterday. The yield on short-term Irish bonds has fallen even more sharply.

The theoretical cost of borrowing over two years has dropped back from 22pc to 13.73pc since the summit.

While the prospects remain weak, Irish government debt is outperforming the market. Greece and Portugal saw yields rise yesterday while Irish yields fell. Italy and Spain are under pressure because of sharp yield rises over the past week.

But borrowing costs for Ireland remain prohibitively high and will have to fall much more radically before there is any hope of exiting the EU/IMF bailout.

Irish Independent

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