Wednesday 21 March 2018

Rise in Irish bond yield eases as 'real economy' boosts markets


Donal O'Donovan

THE apparently relentless rise in Irish government bond yield eased yesterday, as news in the "real economy" boosted markets across Europe.

The yield, or cost of borrowing on Irish 10-year bonds, slipped from 13.8pc to a still-elevated 13.38pc yesterday. Two-year yields dropped from more than 23pc to 21.49pc and pressure eased across the weakest European borrowers.

Markets in general were better on the back of strong company results from the likes of drug maker Novartis and IT giant IBM -- reminders that the economy is ticking along in the background as the debt markets slump.

The euro also rose yesterday, though only after sliding to record lows against the Swiss franc on Monday.

But while the tone was better, there was little evidence of a rally in the markets. Yesterday's improved markets felt more like a pause than a rally and there is little to send bonds higher or lower now before European leaders actually sit down tomorrow.

With markets a touch better, gold fell back from Monday's all-time high, though prices are still close to the high.

Gold is a traditional safe haven in volatile markets, and there is little evidence that's going to end soon.

RBS warned last night the debt crisis in Europe could get worse.

The crisis could develop into a "large systemic risk event" in a matter of days to weeks, according to Harvinder Sian, a senior bond strategist for the bank in London.

"Policy makers remain well behind the curve, and are unlikely to do anything material to assist Spain and Italy," he said in an investor report.

"The conditions for a near-death experience for the euro are in place now, which in turn should finally galvanise a more serious policy reaction."

Despite anticipating a deal to pull back from the edge, he told investors to avoid buying any European bonds -- except Germany's.

Irish Independent

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