Thursday 22 February 2018

Irish bonds weaken after Norwegian state fund sale

Donal O'Donovan

Donal O'Donovan

IRISH government bonds weakened yesterday after the world's largest state-owned investment fund said it dumped all of its Irish and Portuguese government bonds.

The bonds were sold by the Norwegian sovereign wealth fund known as Norges Bank Investment Management which controls €470bn of assets. The money comes from Norway's share of North Sea oil.

Yesterday, the head of the fund said it sold its Irish and Portuguese government bonds and reduced its exposure to the rest of the eurozone, after being hit with losses as a result of the eurozone-sponsored deal to reduce Greek government debt.

Irish government bonds ended marginally weaker across all ends of the curve following the news with nine-year bonds yielding 6.63pc.

That is still far better than the levels that prompted the arrival of the IMF and EU lenders in late 2010.

The Norwegian announcement is a rare vote of no confidence in Ireland after a run of positive sentiment that has seen a sharp and consistent lift in the markets for months, according to bond market analyst Elisabeth Afseth of Investec in London.

She said that it was more of a demonstration against the policies of the eurozone, in particular the Greek debt writedown, rather than Ireland. But she added that it could still have an impact among other investors.

"From a confidence point of view, it's a negative, because it highlights a view that we might still see Greek-style debt restructuring going forward," she said.

Head of the Norwegian fund Yngve Slyngstad made his concerns about the eurozone clear at a press conference in Oslo.

"We are concerned about the situation in the euro area. Predictability is important for a long-term investor and the euro area faces considerable structural and monetary challenges," he said.

The Norwegian fund had opposed Greece's debt swap deal this year because it disagreed with being treated less favourably than the European Central Bank (ECB) under the plan even though they held the securities. (Additional reporting, Bloomberg)

Irish Independent

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