Business Irish

Saturday 24 March 2018

Irish bonds tumble as crucial talks on Greek economy delayed

Thomas Molloy

IRISH bonds tumbled against German and US bonds yesterday as crucial talks about the Greek economy were delayed, prompting renewed fears about the prospects for highly indebted members of the eurozone.

Greece continues to have the highest borrowing costs in Europe followed by Ireland and then Portugal but fears about Portugal's future have pushed Portuguese costs close to Ireland's. The cost of protecting Portugal's debt from losses has risen 263pc in the past six months, the most in the world and more than the 258pc for Greece.

"Greece is the tip of the iceberg," said Louis Gargour, the chief investment officer at hedge fund LNG Capital.

"The more people scratch beneath the surface, the more they'll find countries in the same situation as Greece, which means the more they'll have to tap on the resources of Germany and their resources are not limitless.

"You're migrating payments to the riskier countries from the stable ones and reducing the stable one's credit quality."

The latest spikes in borrowing costs came after the Greek government delayed talks, which had been due to begin yesterday, about a €45bn bailout sponsored by other EU countries and the IMF because of transport problems linked to the volcano in Iceland. The meeting is now due to begin tomorrow.

The 10-year Greek bond yield jumped 38 basis points to 7.82pc, driving the difference in yield, or spread, between the security and bunds to as much as 468 basis points, the most since October 1998.

The Portuguese-German yield spread jumped 13 basis points to 152 basis points and the Irish-German spread rose seven basis points to 154 basis points.

The Greek bailout followed two months of confusing debate among EU officials. During the negotiations, Mrs Merkel dropped a demand that Greece should pay market interest rates on loans after her government previously argued that taxpayers' money shouldn't be put at risk.

Irish Independent

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