Sunday 13 October 2019

'No European consensus' as Irish bonds edge past 6pc

Sarah Collins in Brussels and Brendan Keenan

EUROPE has no consensus on how to fix the eurozone, Luxembourg Prime Minister Jean-Claude Juncker said yesterday, as borrowing costs for peripheral country governments rose again. His comments came as Irish bonds once again traded over 6pc.

As EU leaders met in Brussels, Mr Juncker, who also heads the group of eurozone finance ministers, told the 'Luxemburger Wort' newspaper that lack of action "gives rise to the impression on financial markets that we're not following through in revising the stability pact".


The rates demanded by investors on Irish 10-year bonds again topped 6pc, and Portuguese bonds also reversed recent declines as worries grew about levels of borrowing.

Lisbon yesterday paid 3.37pc on bonds due for repayment in 12 months, compared with 2.76pc for similar bonds sold last July.

Portugal also said it would auction €1bn in 10-year bonds next week. The yield on this 'benchmark' bond will be keenly watched to see how it compares with the prices at which existing bonds are changing hands on the market.

Spain's rating continues to improve. Madrid sold €2.72bn of 10-year bonds at an average yield of 4.144pc, down from 4.83pc in the previous auction on July 6.

Weak demand

Traders said there was weak demand in Irish government debt yesterday as many buyers were planning to purchase at an auction scheduled for next week.

Opening the summit, EU President Herman Van Rompuy said that, while the EU had taken "convincing" efforts to halt the debt crisis, more needs to be done to safeguard growth and jobs and make EU economies crisis-proof.

Analysts at investment bank JPMorgan Chase & Co said Portugal may be slipping behind Spain and Ireland in its efforts to cut budget deficits.

They also warned of tighter credit conditions in Ireland and Portugal if banks cannot increase the amount of borrowing they can do in the financial markets.

Portuguese government spending, excluding interest payments, rose 5.7pc in the first seven months of the year, Portugal's Finance Ministry said last month. Irish Exchequer returns showed a 36pc annual fall in public spending in the 12 months to August, with a 1.6pc drop in current spending.

David Mackie, chief European economist at JPMorgan, said Irish credit conditions could tighten further if banks have to have increased recourse to the European Central Bank for funds.

Central bank loans are for short terms and the banks' balance sheets will shorten in maturity. (Bloomberg)

Irish Independent

Also in Business