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Irish bonds move back towards pre-IMF levels

Irish borrowing rates were moving back towards levels last seen when the IMF/EU team arrived in Ireland in November as investors shunned riskier assets.

The rising bond yields are not thought to be connected to the general election, although there has been concern among some investors about comments from some of the opposition parties.

The benchmark 10-year yield was edging over 9.16pc last night, moving towards the 9.3pc peak reached in late November when it emerged that Ireland was in line for a rescue package from the IMF and EU.

While bonds issued by other 'peripheral' economies also saw their yields rising, Irish bonds were sold off the most on the day, with yields rising by 22 basis points at one point.

Traders said investors were fleeing the riskiest assets in Europe, so Greece and Ireland suffered the most as concern rises over Libya and the wider Middle East. Investors are also concerned about Irish banks and the extent of their dependence on the ECB.

In contrast, German 10-year bund yields reached the lowest in almost a month as tensions rose in the Middle East.

Also impacting on the bond market was Italy, which sold €15bn of inflation-linked bonds into the market, suppressing demand for alternative assets. Italy will sell more bonds today.

"The tensions going on in the Middle East are definitely driving the safe-haven assets," said Norbert Aul, an interest-rates strategist at Royal Bank of Canada in London. "Massive supply, including Italy tomorrow, is also a supportive factor for the bund and suppressing the peripherals."

Greek 10-year yields climbed 11 basis points, or 0.11 percentage point, to 11.86pc at 4.24pm in London, after reaching 11.89 pc, the highest level since January 11. Portuguese 10-year yields added four basis points to 7.5 pc, while Italian 10-year yields gained a point to 4.84pc.

Irish Independent