Cost of Irish debt falls

Scofflaw

Initial economic fallout from the Yes vote:

LONDON, Oct 5 (Reuters) - The Irish 10-year government bond yield spread over euro zone benchmark German Bunds tightened by 6 basis points on Monday, while the cost of protecting Irish debt against default dropped.

Meanwhile, the 10-year Greek government bond yield spread over Bunds also narrowed by 6 basis points.

These moves followed Irish voters endorsement of the European Union's Lisbon Treaty and a widely-expected change of government following Greek elections at the weekend.

Five-year credit default swaps (CDS) on Irish government debt contracted to 130.5 basis points from 138.5 bps on Friday, according to credit monitor from CMA DataVision.

It means the cost falls to 130,500 euros to protect 10 million euros-worth of Irish government bonds.

The 10-year Irish/Bund spread was last seen at 159 bps, retaining their position as the euro zone's highest-yielding sovereign debt, according to Reuters data.

Source

This was widely regarded as predictable - part of the effects of a Yes vote confirming Ireland's long-term intentions.

cordially,
Scofflaw

Sam Vimes

But but but, there wasn't an article in the treaty to say that would happen, I thought Ireland's acceptance of the treaty had nothing to do with the economy

marco_polo

Scofflaw wrote: »

Initial economic fallout from the Yes vote:



Source

This was widely regarded as predictable - part of the effects of a Yes vote confirming Ireland's long-term intentions.

cordially,
Scofflaw

As was indeed predicted by a number of our leading economists, but sure what would they know about it?

Robbo

Scofflaw wrote: »

This was widely regarded as predictable - part of the effects of a Yes vote confirming Ireland's long-term intentions.

You mean Declan Ganley misled us when he said that the bond spread wouldn't change?

Next you'll be telling me that's not a real Tuam accent he has...

BlitzKrieg

when will we know if it will continue to narrow?

wylo

I hope this kinda stuff makes bigger news, there seems to be a post lisbon no campaign spreading across the internet, mainly stemming from Lenihans comments about the treaty not being a job creation program. He really shouldn't have put it like that.
I was labeled as a "sheep" for "buying into the lies" today in work by a few no voters.

Wheely

But where are the ACTUAL jobs........?

MikeC101

The problem is, that those now convinced that everyone who voted yes did so in the belief that suddenly we'd hit full employment are utterly sure it could only have been meant in that context.

They are absolutely not going to accept anything as evidence of a yes vote to Lisbon contributing to a better economic climate, which I thought it was fairly obvious the "Yes to Jobs" posters meant. I will point out I didn't like those posters, nor did I vote yes for the "jobs" reason.

When you see stuff posted like "Yes voters - where are all the jobs?", you know there is absolutely no point in trying to get across the idea of improved investor confidence, or scary notions like "bond yield spreads", which is quite possibly voodoo of some sort.

meglome

MikeC101 wrote: »

The problem is, that those now convinced that everyone who voted yes did so in the belief that suddenly we'd hit full employment are utterly sure it could only have been meant in that context.

They are absolutely not going to accept anything as evidence of a yes vote to Lisbon contributing to a better economic climate, which I thought it was fairly obvious the "Yes to Jobs" posters meant. I will point out I didn't like those posters, nor did I vote yes for the "jobs" reason.

When you see stuff posted like "Yes voters - where are all the jobs?", you know there is absolutely no point in trying to get across the idea of improved investor confidence, or scary notions like "bond yield spreads", which is quite possibly voodoo of some sort.

The annoying thing is in the run-up to the vote many of us spelt out several times that 'Yes for jobs' did not mean immediate jobs, nor was it a promise of jobs. The same with 'yes for the economy. etc. To have to repeat the same things again and again after the vote was even worse. I wouldn't mind but many of the people doing the whining about it were involved in the earlier discussions. They're either being purposefully obtuse or they have very bad memories.

Wheely

MikeC101 wrote: »

The problem is, that those now convinced that everyone who voted yes did so in the belief that suddenly we'd hit full employment are utterly sure it could only have been meant in that context.

They are absolutely not going to accept anything as evidence of a yes vote to Lisbon contributing to a better economic climate, which I thought it was fairly obvious the "Yes to Jobs" posters meant. I will point out I didn't like those posters, nor did I vote yes for the "jobs" reason.

When you see stuff posted like "Yes voters - where are all the jobs?", you know there is absolutely no point in trying to get across the idea of improved investor confidence, or scary notions like "bond yield spreads", which is quite possibly voodoo of some sort.

Sorry Mike......maybe it wasn't clear. I was being sarcastic. My bad. I was not surprised to wake up this morning and hear that 400,000 ACTUAL LISBON jobs had, in fact, not been created.

MikeC101

Wheely wrote: »

Sorry Mike......maybe it wasn't clear. I was being sarcastic. My bad. I was not surprised to wake up this morning and hear that 400,000 ACTUAL LISBON jobs had, in fact, not been created.

Not directed at you Wheely, I had the post typed out before you even posted yours!

Moreso at the staggering amount of people (I assume No voters) who seem convinced the only reason anyone voted Yes was based on the "Yes to Jobs" poster.

Dob74

Sam Vimes wrote: »

But but but, there wasn't an article in the treaty to say that would happen, I thought Ireland's acceptance of the treaty had nothing to do with the economy

Lets check out the state of the country in a few years. Markets move daily, but in a few years we will still be in it up to our necks with no way out.
Looking forward to all the b;tching when the ecb rises interest rates. What do u think 1,2,3 months time?

meglome

Dob74 wrote: »

Lets check out the state of the country in a few years. Markets move daily, but in a few years we will still be in it up to our necks with no way out.
Looking forward to all the b;tching when the ecb rises interest rates. What do u think 1,2,3 months time?

The ultimate reason for getting out of this mess will be our government which hopefully isn't the current one. Although I don't care who gets us out of this mess as long as it's done. But the Yes vote to Lisbon will help.

Martin 2

Very good news, in fact most of the forecasts weren't so much that a Yes would lower bond yield spreads but that a No could raise them by up to 100bp, link


Let's hope it continues to fall.

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rumour

Scofflaw wrote: »

Initial economic fallout from the Yes vote:



Source

This was widely regarded as predictable - part of the effects of a Yes vote confirming Ireland's long-term intentions.

cordially,
Scofflaw

Any good news has to be welcomed, lets hope it continues. I'm not in a glass half full mood at the moment though.

the flananator

Scofflaw wrote: »

Initial economic fallout from the Yes vote:



Source

This was widely regarded as predictable - part of the effects of a Yes vote confirming Ireland's long-term intentions.

cordially,
Scofflaw

For plebs like myself, could someone explain to me what this actually means?

Thanks.

rumour

Dob74 wrote: »

Lets check out the state of the country in a few years. Markets move daily, but in a few years we will still be in it up to our necks with no way out.
Looking forward to all the b;tching when the ecb rises interest rates. What do u think 1,2,3 months time?

for your info I suspect we have a bit longer to wait before we're out of the woods.http://news.xinhuanet.com/english/2009-10/02/content_12172204.htm

ei.sdraob

the flananator wrote: »

For plebs like myself, could someone explain to me what this actually means?

Thanks.

currently the government is borrowing 400million+ a week to keep the show going

now they have to pay less interest on any new debts they take on

less interest means less money being wasted, money that would have to be collected via taxation at some point

hope thats clear? and yes do imagine what interest on 400mill a week looks like

A NO would have created uncertainty, uncertainty => more risk, more risk => higher interests, higher interests => more raping of taxpayers

Plotician

forget the interest, I'm trying to imagine the 400 million!

Does anyone know how long it's anticipated we'll be borrowing at this level?

Oh, and re the promise of jobs, FG were the main culprits on that one, starting with Enda himself! (and the odd ffer who probably were'nt referring to the hymm sheet)

ei.sdraob

Plotician wrote: »

forget the interest, I'm trying to imagine the 400 million!

Does anyone know how long it's anticipated we'll be borrowing at this level?

Oh, and re the promise of jobs, FG were the main culprits on that one, starting with Enda himself! (and the odd ffer who probably were'nt referring to the hymm sheet)

if you cut all of welfare (20billion+) and some public sector cuts (lets say 5 billion somehow is cut)

we would still need to borrow! the deficit this year is approaching 30billion


the interest we pay is very important

alot of people stuck with mortgages now on negative equity would relate to low interest rates being a silver lining

this is the same except on MUCH LARGER SCALE


a YES vote made a bad situation slightly better, which is much better than the alternative

Sir Oxman

Dob74 wrote: »

Lets check out the state of the country in a few years. Markets move daily, but in a few years we will still be in it up to our necks with no way out.
Looking forward to all the b;tching when the ecb rises interest rates. What do u think 1,2,3 months time?

I hope the OP's post was intentioned as part of a realistic, longterm outlook for our lovely, Banana Republic. (due to the YES vote, of course)

Sir Oxman

ei.sdraob wrote: »

if you cut all of welfare (20billion+) and some public sector cuts (lets say 5 billion somehow is cut)

we would still need to borrow! the deficit this year is approaching 30billion


the interest we pay is very important

alot of people stuck with mortgages now on negative equity would relate to low interest rates being a silver lining

this is the same except on MUCH LARGER SCALE


a YES vote made a bad situation slightly better, which is much better than the alternative

Which was what, exactly?

ei.sdraob

gambiaman wrote: »

Which was what, exactly?

more uncertainty hence higher interest on our new loans

someone had a link earlier

a NO vote would have been another economic nail in a deep coffin

P. Breathnach

gambiaman wrote: »

Which was what, exactly?

Getting worse.

K-9

gambiaman wrote: »

Which was what, exactly?

The opposite to the OP.

Sir Oxman

P. Breathnach wrote: »

Getting worse.

I suggest you contribute (however badly) rather than be a mealy-mouthed sycophant jabbering a sloppey aside.

more uncertainty hence higher interest on our new loans

someone had a link earlier

a NO vote would have been another economic nail in a deep coffin

You are surmising.
It is only Monday after all.

Sir Oxman

K-9 wrote: »

The opposite to the OP.

And you know this how?

Oh boy, wait till the big **** hits the fan.

K-9

gambiaman wrote: »

And you know this how?

Oh boy, wait till the big **** hits the fan.

And a No vote would have changed this how?

yep, I Know a No vote would cost us money.

P. Breathnach

gambiaman wrote: »

I suggest you contribute (however badly) rather than be a mealy-mouthed sycophant jabbering a sloppey aside...

Don't mistake me for mealy-mouthed simply because I don't have much regard for nonsense.

Plotician

I think there's a risk any spin-off economic benefit from the yes result could be short-lived. Unless we start to show strong strategic policies that steer a clear path towards economic improvement any lift in international confidence could be quickly undermined.

The government is banking on NAMA and a severe budget, the public sector is lining up to do battle - its a tightrope act to say the least.

The inference during the referendum was 'yes for jobs' 'yes for the economy', doesn't matter how anyone defines that here we all know how the guy in the street interpreted it.

Problem is Lisbon in the short term could all prove fairly irrelevant unless we provide our own advantages for attracting foreign investment.

I suspect we're all going to feel a little lonely here in Ireland for a while.

Thomas_S_Hunterson

the flananator wrote: »

For plebs like myself, could someone explain to me what this actually means?

Thanks.

You can now get a price of 74 to 1 if you think Ireland's going to go busto, as opposed to 70 to 1 before the spread narrowed :pac::P

P. Breathnach

Plotician wrote: »

... The inference during the referendum was 'yes for jobs' 'yes for the economy', doesn't matter how anyone defines that here we all know how the guy in the street interpreted it...

Do we?

My opinion is that the guy in the street interpreted the slogans to mean that a yes vote would in some unspecified way be better for the economy and for job prospects than a no vote. I also imagine that there was no expectation that any effect be immediate, but would happen over time.

Is that what you mean?

roosh

Scofflaw wrote: »

Initial economic fallout from the Yes vote:



Source

This was widely regarded as predictable - part of the effects of a Yes vote confirming Ireland's long-term intentions.

cordially,
Scofflaw

This is all very good in the immediate short-term (days after the result), but if we are hoping to base any sort of long-term recovery, apologies, if we are looking to base any sort of recovery on this, then I'm afraid we are all very, very naiive.

The uncertainty over the irish Government will likely have a bigger effect on this, with a general election having a negative effect. Following the logic, should the Greeens therefore consider compromsing their principles just because it may have a short term imapct on the markets?

Sam Vimes

mangaroosh wrote: »

This is all very good in the immediate short-term (days after the result), but if we are hoping to base any sort of long-term recovery, apologies, if we are looking to base any sort of recovery on this, then I'm afraid we are all very, very naiive.

The uncertainty over the irish Government will likely have a bigger effect on this, with a general election having a negative effect. Following the logic, should the Greeens therefore consider compromsing their principles just because it may have a short term imapct on the markets?

No the greens shouldn't compromise their principles. If there is an overriding reason to do something such as bring a general election then the benefits of doing it outweigh the cost of the uncertainty to the economy but since all the reasons to vote no to Lisbon were scaremongering lies and there was no actual benefit to a no vote, only cost, the economic uncertainty becomes a factor.

Economic uncertainty doesn't trump all other motivations but it certainly trumps paranoid nonsense and lies, which is what the no campaign was

roosh

Sam Vimes wrote: »

No the greens shouldn't compromise their principles. If there is an overriding reason to do something such as bring a general election then the benefits of doing it outweigh the cost of the uncertainty to the economy but since all the reasons to vote no to Lisbon were scaremongering lies and there was no actual benefit to a no vote, only cost, the economic uncertainty becomes a factor.

Economic uncertainty doesn't trump all other motivations but it certainly trumps paranoid nonsense and lies, which is what the no campaign was

careful now, you may just be asked to back up your spurious claims

Scofflaw

mangaroosh wrote: »

This is all very good in the immediate short-term (days after the result), but if we are hoping to base any sort of long-term recovery, apologies, if we are looking to base any sort of recovery on this, then I'm afraid we are all very, very naiive.

The uncertainty over the irish Government will likely have a bigger effect on this, with a general election having a negative effect. Following the logic, should the Greeens therefore consider compromsing their principles just because it may have a short term imapct on the markets?

I foresee, I have to say, a great future for you in the agricultural corvid-repellent mannequin market.

I don't think anyone voted Yes in order to have the markets rise slightly in the following days. It's merely a demonstration of the more general point about a Yes vote improving international confidence in Ireland.

regards,
Scofflaw

Sam Vimes

mangaroosh wrote: »

careful now, you may just be asked to back up your spurious claims

I've backed them up over and over and over again.

roosh

Scofflaw wrote: »

I don't think anyone voted Yes in order to have the markets rise slightly in the following days. It's merely a demonstration of the more general point about a Yes vote improving international confidence in Ireland.

regards,
Scofflaw

I know that's not why people voted yes, the reason the majority of people voted yes was because they belived that it would lead to economic recovery in the long term.

The effect that Lisbon will have on economic recovery has been seen - a short term impact on the Credit Swaps market. This overwhelming confidence that will see the good ol' days return will now be subjected to other market forces, such as the possibility of a general election and the uncertainty surrounding our government.

International confidence in Ireland is dependent on a hell of a lot more than Lisbon, and indeed, one would have to wonder what international confidence will be like when they realise Irelands current plight and the fact that it will take us longer to get out of the recession than others. Also, with Irelands vastly reduced influence in the EU, perhaps there may be greater incentive to set up operations in those countries with actual influence, say Germany or France. Afterall, why make political donations in Ireland when Ireland will have very little influence in directing EU policy?

roosh

Sam Vimes wrote: »

I've backed them up over and over and over again.

Fair enough, I didn't want to descend into another comparison of the rhetoric used by both sides of the campaign.

The fact remains, that the movement on the credit swaps shown in the OP represents little more than a short term reaction by the markets, in the immediate aftermath of the referendum result. Indeed, one would have to question the overall impact of the Yes vote at all, considering that it would have actually been priced into the rate in the weeks leading up to the referendum. One would also have to question how much of the improvement was merely down to the resolution of an uncertain issue, and how much was down to the Yes vote itself.

If we look at the attached graph of the Credit swaps over the past month, we can see that it spikes on the 2nd of October (the day of the referendum) when the outcome was pretty certain, only for any gains to be decimated immediately after. Again, if we consider the fact that the impact of the Yes vote would have actually been priced into the CDS rate, prior to the referendum, then one must wonder what was the actual positive impact of the yes vote was? It would appear incredibly short term.

K-9

mangaroosh wrote: »

Also, with Irelands vastly reduced influence in the EU, perhaps there may be greater incentive to set up operations in those countries with actual influence, say Germany or France. Afterall, why make political donations in Ireland when Ireland will have very little influence in directing EU policy?

What vastly reduced influence?

roosh

K-9 wrote: »

What vastly reduced influence?

Did you not see the new QMV voting ruling?

K-9

mangaroosh wrote: »

Did you not see the new QMV voting ruling?

Yeah. How does it drastically reduce our influence?

roosh

K-9 wrote: »

Yeah. How does it drastically reduce our influence?

tis a bit late for this now.

with the change from the existing QMV rules to the new ones, due to the shift to population weighting, Ireland has drastically reduced voting rights. This is of particular note when it comes to vetoing legislation, where 4 countries representing at least 35% of the population is required. This means that with Irelands 0.8% of the population, it effectively has no power to veto legislation, whatsoever.

Also, with the shift of an increasing number of areas to the new QMV rules, Ireland has a greatly reduced vote, in an increased number of areas. Therefore, Ireland's influence is greatly reduced.

K-9

mangaroosh wrote: »

tis a bit late for this now.

with the change from the existing QMV rules to the new ones, due to the shift to population weighting, Ireland has drastically reduced voting rights. This is of particular note when it comes to vetoing legislation, where 4 countries representing at least 35% of the population is required. This means that with Irelands 0.8% of the population, it effectively has no power to veto legislation, whatsoever.

Also, with the shift of an increasing number of areas to the new QMV rules, Ireland has a greatly reduced vote, in an increased number of areas. Therefore, Ireland's influence is greatly reduced.

YEP. It has been done to death.

The 35% only occurs in situations where all 27 don't vote. When all 27 vote, 4 countries of any size can veto.

Of course even the 35% part is largely redundant as 15/27 have to agree first. The 65% only comes into play then. You could have 65% in support but only 6 countries.

You need 15 countries in support. That is the most important criteria as the majority of countries are less than 11/12 Million. Worst case senario, you need 6 big countries in support and 9 small countries.

Scofflaw

mangaroosh wrote: »

tis a bit late for this now.

with the change from the existing QMV rules to the new ones, due to the shift to population weighting, Ireland has drastically reduced voting rights. This is of particular note when it comes to vetoing legislation, where 4 countries representing at least 35% of the population is required. This means that with Irelands 0.8% of the population, it effectively has no power to veto legislation, whatsoever.

Also, with the shift of an increasing number of areas to the new QMV rules, Ireland has a greatly reduced vote, in an increased number of areas. Therefore, Ireland's influence is greatly reduced.

Again? The current system already uses population weights - it's a three-factor system, population (Ireland:0.8%), council vote (Ireland:2.02%), membership (Ireland:3.7%). We're moving to a two-factor system, population and membership.

Average weight in current system = 2.17%

Average weight in new system = 2.25%

Or you can do it by the various programmatic methods, with similar results. There's very little change involved either way, because the main reason for the QMV changes is simply to eliminate the council vote, because adjusting that on each new accession involves a round of political horse-trading, whereas just using population and membership means the change in voting weights is purely automatic.

Take the accession of Croatia. Under the Lisbon rules, we'd have the following changes:

1. New population weight: 4.2m/(493m+4.5m) = 0.844% (currently 0.852%)
2. New membership weight: 1/28 = 3.57% (currently 3.7%)

Under the Nice rules, we'd have the above, plus the change in council votes, which is unpredictable, because it's not governed by any formula - instead, it would be determined by all 28 states sitting down and negotiating the weights, a process at which Ireland could do well or badly.

Either way, the whole question of QMV weights remains much ado about nothing, since Council voting under QMV is both rare (about 15-20% of issues come to a vote) and dominated by the question of alliances. Ireland's extremely small voting weight makes it absolutely necessary that we have allies - without which, the difference between our Lisbon and Nice weights has as much practical effect as a gnat's fart.

regards,
Scofflaw

View

Personally, I hope the Lisbon voting system is replaced in the next Treaty. The Polish twins proposed - at the last minute unfortunately - the Penrose system where every state has a vote = the square root of its population with a simple 60% pass threshold. Even if it is not perfect, it at least has the advantage of being a lot easier to get your head around.

Dob74

Scofflaw wrote: »

Initial economic fallout from the Yes vote:



Source

This was widely regarded as predictable - part of the effects of a Yes vote confirming Ireland's long-term intentions.

cordially,
Scofflaw

Yups I guess voting Yes didn't help us in the long term after all.
It hurts me being so right.

passive

Dob74 wrote: »

Yups I guess voting Yes didn't help us in the long term after all.
It hurts me being so right.

Yeah, 'cos this whole awful situation would be going so much better for is if we'd voted no again. Really. That's totally relevant.

Scofflaw

Dob74 wrote: »

Yups I guess voting Yes didn't help us in the long term after all.
It hurts me being so right.

Goodness! You were able to predict the size of the Anglo bailout? That's very impressive - and no doubt you can show us where you did that - but I have no idea what it's supposed to have to do with Lisbon.

amused,
Scofflaw

wylo

Dob74 wrote: »

Yups I guess voting Yes didn't help us in the long term after all.
It hurts me being so right.

Please please expand on this point, because as far i can see so far, our government creating a black hole that billions gets sucked into has nothing to do with Lisbon. Tbh if it wasnt for europe lending,at this point we'd be kissing goodbye to alot of our standards of living that we are still enjoying to this day despite all of this anglo madness.

Martin 2

Dob74 wrote: »

Yups I guess voting Yes didn't help us in the long term after all.
It hurts me being so right.

How do you know it didn't? unless you have access to some parallel universe where Ireland voted No and all our problems magically disappeared.