Wednesday 12 December 2018

Shares steady amid rising debt costs

A pedestrian is reflected in a window where an investor sits looking at a board displaying stock prices at the Australian Securities Exchange (ASX) in Sydney
A pedestrian is reflected in a window where an investor sits looking at a board displaying stock prices at the Australian Securities Exchange (ASX) in Sydney
Donal O'Donovan

Donal O'Donovan

World shares climbed half a percent yesterday, attempting to brush off fresh rises in global bond yields while equity futures also pointed to a firmer session on Wall Street which suffered its worst week in two years.

Even so, a continued move-up in bond yields is reinforcing the fear of more volatility ahead.

Ten-year US Treasury bond yields hit new four-year highs around 2.90pc, while German yields, the benchmark for Europe, hovered just below 0.80pc, indicating higher borrowing costs across the market.

In currencies, sterling slipped back towards a three-week low against the dollar yesterday, weighed down by uncertainty among investors over whether Britain would succeed in securing a post-Brexit transition period.

The pound skidded on Friday after the EU's chief Brexit negotiator, Michel Barnier, warned that a transition deal was far from assured. Those comments, as well as broad strength in the dollar amid a sharp stock market sell-off, handed sterling its biggest weekly falls since October, as investors worried that Britain could leave the European Union in a disorderly manner.

The pound's losses came despite a surprisingly hawkish policy meeting from the Bank of England, which said interest rates could rise sooner and by a bit more than investors were expecting.

At home, the The National Treasury Management Agency (NTMA) announced cancellation of €500m of floating rate bonds due to mature in 2047, after buying them back from the Central Bank.

The bonds were linked to the liquidation Irish Bank Resolution Corporation (IBRC), and are part of an ongoing buy-to-cancel strategy from the NTMA.

Irish Independent

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