Irish bonds jump as Government requests bailout funds
Irish bonds jumped after the Government requested aid from the European Union and International Monetary Fund to shore up its finances, making Ireland the second euro nation to seek a rescue.
German bonds fell, pushing the 10-year yield to the highest in almost four months, as demand for the safest assets waned.
The Europe Stoxx 600 Index of equities rose 0.6pc, while the euro also climbed 0.6pc.
Ireland will pass some of the money to its banks, with the rest helping the Government avoid having to sell bonds, Finance Minister Brian Lenihan told reporters late yesterday.
“An aid package is good for Irish debt, but it was very well flagged,” said Charles Diebel, head of market strategy at Lloyds TSB Corporate Markets in London. “As details emerge, it should add to the relief rally.”
The yield on Irish 10-year bond fell 17 basis points to 8.18pc at 8:44am. The 5pc security due October 2020 climbed 0.97, or 9.70 euros per 1,000-euro face amount, to 78.99. The bund yield was little changed at 2.71pc.
The difference in yield, or spread, between German and Irish 10-year bonds narrowed 11 basis points, or 0.11 percentage point, to 530 basis points, according to Bloomberg generic data.
The bailout may total €95bn, according to Goldman Sachs. The Government needs €65bn to fund itself for the next three years and €30bn for the banks, Goldman Sachs Chief European Economist Erik Nielsen said yesterday.
Irish 10-year bonds rose last week for the first time since the five days ending October 15 as EU and IMF staff arrived in Dublin to inspect the nation’s banks and begin talks. Irish officials said as recently as November 15 they didn’t need aid.
While Ireland is fully funded until the middle of next year, the yield on Irish 10-year bonds soared to a record 652 basis points above bunds on November 11.
Portuguese bonds rose, pushing the 10-year yield down six basis points to 6.9pc.
Irish government bonds have lost investors 12pc this year, compared with a 9.1pc decline on investments in Portuguese bonds, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
German securities returned 6.9pc, France 6.5pc and US Treasuries earned 7.4pc in the period, the indexes showed. Greek bonds lost 19pc.