Irish bond prices

There's only one bond you should be worried about

The market price of our bonds is only based on the perception of risk of default, not the actual risk itself. The FT last weekend pointed out that Ireland has taken responsible steps to curb its expenditure and is being, for want of a better metaphor, picked on ruthlessly by the vultures of the financial markets who've already picked over Greece's corpse.

The problem is, once the markets have turned on you it's very difficult to restore confidence and scaremongering threads like this don't help.

It is also playing directly into the hands of investment bankers in London and New York who don't even own the underlying bonds and have taken out 'naked' credit default swaps on Irish debt. These guys stand stand to cash in big time if Ireland defaults.

This might sound a bit conspiracy theorist, but it can and does happen (Goldmans already got fined this year for selling debt obligations to investors and subsequently betting against those same obligations) so it's not too much of a stretch of the imagination to expect that there may be less than savoury reasons for this otherwise unremarkable Barclays memo having received so much media attention :rolleyes:

Keep calm and carry on people

The bond issue tomorrow should be fine. We're front-loaded for the entire year and can skip it if conditions get hysterical.

In fact, we can skip it for the next few months if need be. We have €10bn in cash from the 2008 surplus budget that we can use to take a break from the bond markets for a while.

Ireland is also in the happy position of only holding 15% of our debt domestically; there are a lot more than just us who are going to feel the pain if we default. The same Barclays note points out that Irish domestic banks own just €8.5bn of the debt, compared with balance sheets of about €700bn. A default on Irish debt won’t be borne by Irish banks, or by many Irish institutions at all.

My message to the institutional investors who buy our bonds is this: Irish government debt needs you, so step up or step off, fcukers.

Sticky_Fingers wrote: »

We have financed 90% of our debt for this year (if I recall correctly) but when we finally do need to go to the bond markets it could get very hairy for us again. This cost of borrowing is unprecedented for the Irish state and we simply cannot afford it at these rates. The fact that they even reached these levels is not something that can be casually dismissed. The markets smell weakness and something has to be done to reassure them. They are heartless bastards but they call the tune and we need to find a dance they like so the rates will go down and we can afford to borrow again if we want to keep this freakshow on the road. What they want I have no idea but these vultures are circling so the lads in charge better think of something.

It's not unprecedented.

But if the prices tomorrow are anything much over the 5.5 percent likely to be charged by the Euro Stability Fund then I agree, the yield isn't sustainable. If we do have to go to that fund, it won't be until early next year. Tomorrow isn't determinative of anything.

As an alternative to the BarCap memo that caused half of Ireland to cack themselves this week (no doubt helped by the 'incisive' and totally non-alarmist financial reporting the Indo and Daily Mail are known for), I present an alternative view from Goldman Sachs:

The embattled Irish government will hit the market on Tuesday with an auction of four and eight year bonds. This might be some test follow the beating of its debt – in spite of ECB interventions – following the latest concerns about the size of the hole in its banking system. While on the road, I was shown two recent research reports on the banks from two competitors, one of which seems to have caused some of the concern; presumably because of its alarmist tone. I am not going to comment on competitors’ research apart from saying that I didn’t see any ground breaking news in either of the two reports, but – as so often before – if you blow hard enough at a simmering flame of concern, that’s what you get. Picking up on the theme, the Irish Independent claimed that the Irish government is close to calling in the EFSF and the IMF, something denied by the IMF.

Sticky_Fingers wrote: »

I am not completely up with the financial markets but as far as I know (please correct me if I'm wrong) but isn't that an extremely bad thing since most of that debt is owed to European banks and this will lead to the worst case scenario of contagion were our problems infect the rest of the Eurozone if its not sorted.

Ireland isn't the centre of the world like many of us think it is and isn't likely to bring down the Eurozone on its own. However, it's enough to galvanise the EU into giving us a dig out with cheap German money if we need it

My name is URL wrote: »

Our future seems to be in the hands of speculators.. not gonna end well

Our future is in our hands. as it was when people were borrowing 300k for a gaf in a floodplain in westmeath, which of course was the banks fault.

Stupid bloody recklessness got us here by a huge portion of the Irish populace and we can get ourselves out but bloody moaning and worrying wont do it.