Either global bond markets have gone completely barmy, or we in Ireland are utter fools to have stood over every euro of our national debt.
The Greeks have just raised €3bn of five-year debt on the markets at a yield of 4.95pc. The order book showed a massive appetite for the bonds with €20bn of orders coming from 550 customers around the world.
This is quite bizarre. Greece has undergone enormous economic austerity to try and tidy up its affairs. It is in the middle of an international bailout programme but still has enormous problems to overcome. It owes €320bn which is around 175pc of GDP. Ratings agencies still have its bonds at junk status.
Just two years ago it restructured its borrowings which saw private sector write-offs of sovereign debt amounting of close to €100bn. Yet, investors are falling over themselves to subscribe for new five year debt.
If it was possible to write-off of €100bn of debt from the market and still come back a couple of years later and borrow €3bn at under 5pc, then it raises serious questions about our “good boy” performance in Europe, where we ensured everybody got paid – even on banks that went hopelessly bust.
Should we have defaulted, got a write-off and come back a few years later?
The other possibility is that the markets have gone mad. Quantitative easing in the US and massive bond buying in Europe, has created vast sums of money looking for an investment home.
High demand can be generated not so much by the attractiveness of the product – in this case Greek five year debt – but also simply by lots of money looking for an investment home.
This can be a bubble of sorts and at the very least it creates a sense of unreality about international bond markets, which is deeply troubling.
What happens in Greece is relevant to Ireland in three distinct ways.
1. It raises questions about the wisdom of Ireland’s course of action in paying everybody in full.
2. If the Greeks can come through this crisis and actually get back into the bond markets, it suggests there is greater stability around the future of the single currency and ultimately that is good for Ireland.
3. If a country with so far still to go by way of economic correction can do this, perhaps there is a bond-buying bubble out there and it could burst.
Bear in mind, Greek trade unions organised another nationwide anti-austerity strike on Wednesday and a bomb went off in Athens on Thursday. Yet, they have raised money at a surprisingly low yield.
It may go some way towards explaining the extraordinarily low yields on Irish debt. Perhaps we are fooling ourselves into thinking our debt yields are so low (a good thing for Ireland) because of the success of our economic story. It could just simply be a delusion created by temporary measures introduced by the US Fed and the ECB.
Time will tell.