And we thought 6% was bad

joe316

Currently the 10 year bond rate is at 6.95% as of 8:30am and rising fast. I thought 6% was a watershed, the markets have no confidence in us getting out of this mess (not that I thought zanu FF would either)

Talk about depressing

http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

dan_d

This is the stuff I don't read.There's enough bad news out in the world, without knowing info like this......the bond markets did business before and during this mess without me knowing, and I'm quite sure they'll keep doing it without me.

I'd rather concentrate on things closer to home, that I can have an impact on, and help to change.

Ludo

7.06% now and rising FAST...

But not to worry...we have turned the corner...:rolleyes:

http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

c montgomery

dan_d wrote: »

This is the stuff I don't read.There's enough bad news out in the world, without knowing info like this......the bond markets did business before and during this mess without me knowing, and I'm quite sure they'll keep doing it without me.

I'd rather concentrate on things closer to home, that I can have an impact on, and help to change.

Maybe you chould take an interest in them, after all you will be paying more tax for less services next year to try and pay off these bondholders.

Battleneter

Are you sure you guys aren't reading to much into government bonds.

Austruckenfailer supposedly has one of the strongest economies in the OECD atm and there rate has been over 5 all year and close to 6 in April. Seems the smaller economies are paying more atm, NZ is another about 5.1 both countries have fairly low public debt.


Where the US which is in the toilet atm is only 2.5, no one here can seriously say confidence in the US economy is high.

average_runner

Why should we take much interest in them. None of the TD's in the dail care going by the evidence from the turn out yesterday.

And people thinking voting FG/Labour will make a difference!!!!!!

eoinbn

That app must track a slightly different bond rate than the one that is quoted in the media as it nearly always underestimates the rate(by about .1%).

Thank feck the government didn't call an election 3 weeks ago as the uncertainty would have spooked the markets! Oh wait....

ei.sdraob

Battleneter wrote: »

Are you sure you guys aren't reading to much into government bonds.

Austruckenfailer supposedly has one of the strongest economies in the OECD atm and there rate has been over 5 all year and close to 6 in April. Seems the smaller economies are paying more atm, NZ is another about 5.1 both countries have fairly low public debt.


Where the US which is in the toilet atm is only 2.5, no one here can seriously say confidence in the US economy is high.

You are missing the ECB shaped elephant in the room
Ireland also regularly had 6% rates in 90s, but we also had own currency and set own central bank rates just like these states you mention.

In the case of Ireland, the issue is that the markets are factoring in a default probability of 33% in next 5 years, doesnt sound so high some might say but its the fact that it has risen so quickly sending Ireland into top 5 countries to default list alongside such fine places as Argentina, Venezuela, Iraq, Dubai



here is another way of looking at our mess (courtesy of David McWilliams)

However, our Irish bank reparations dwarf those of Versailles. The Treaty of Versailles demanded that Germany pay €318bn in today's money. From a German population at the time of 58 million, this equates to €5,482 per person in today's money. If bank bailout costs are €50bn, then this will work out at €11,235 per head -- or more than twice the cost per head of the Treaty of Versailles to the average German.

We all know which path Versailles debt repayments pushed Germany towards...

johnnyskeleton

7 more or less on the button now.

murphaph

I wonder did the markets react badly because Lenny thinks he can frontload all the pain this december but somehow avoid cutting PS pay whilst doing it? I wouldn't blame them tbh: it's impossible to make a meaningful dent in the defecit without reducing CORE PS pay AND numbers. The defecit is just too large now.

Mena

murphaph wrote: »

I wonder did the markets react badly because Lenny thinks he can frontload all the pain this december but somehow avoid cutting PS pay whilst doing it? I wouldn't blame them tbh: it's impossible to make a meaningful dent in the defecit without reducing CORE PS pay AND numbers. The defecit is just too large now.

According to the IT, Bloomberg yesterday stated:

Bloomberg wrote:

Yesterday news agency Bloomberg reported that bond investors were losing faith in Ireland’s plan to lower the deficit as spending cuts threaten to undermine economic growth, reducing Government revenue.

Source

maninasia

Forgive me if I am wrong but it is in the bond markets interests to create uncertainty and push up interest rates too. I have heard some talk that the bond markets think Ireland is a good bet, high yield debt at relatively low risk since Ireland is in the EU and would get bailed out by ECB and probably will be next year.
That doesn't mean Ireland is in good shape, I'm just pointing out how the situation can be manipulated to get the most cash out of us.

Can somebody explain to me how the yield thing works, does it keep increasing until if finds a buyer, is that how the minimum yield is found?

jank

murphaph wrote: »

I wonder did the markets react badly because Lenny thinks he can frontload all the pain this december but somehow avoid cutting PS pay whilst doing it? I wouldn't blame them tbh: it's impossible to make a meaningful dent in the defecit without reducing CORE PS pay AND numbers. The defecit is just too large now.

My thoughts exactly. Cut 6 15 billion but somehow keep PS pay as it is...yea right. Might fool the fools in RTE, not the bond market.

maninasia

maninasia wrote: »

Can somebody explain to me how the yield thing works, does it keep increasing until if finds a buyer, is that how the minimum yield is found?

you got it in one, basic supply and demand!

Dirk Gently

maninasia wrote: »

Forgive me if I am wrong but it is in the bond markets interests to create uncertainty and push up interest rates too. I have heard some talk that the bond markets think Ireland is a good bet, high yield debt at relatively low risk since Ireland is in the EU and would get bailed out by ECB and probably will be next year.

This is the problem really. All this ****e about appeasing the "markets" with cuts and taxes is beside the point. People talking about how the markets will react to such and such a decision fail to realise that its basically free money on a one horse race, why would they lower the rate. Betting on Ireland is the equivalent of betting on chelsea to win the premier league with 5 games to go and with them 16 points clear of their nearest rivals. High borrowing interest = more cuts and money taken out of our economy to pay for it = prolonged stagnation = more borrowing = risk free money for the bond holders as they know an EU country wont default. They know there's a big pot of EU money to cover the bonds when we need to be bailed out. Why would they care about the irish economy when there is already money put aside to pay them.

The EU will eventually be left with 2 choices, cut countries like ireland loose or implement euro wide regulation of bond markets with the EU setting low rates at which euro countries borrow. Those who want to sell debt outside of the regulated price should run the full risk of default with those operating inside the regulated prices getting priority repayments. Let the high interest lenders take the higher risk.

Paleface

clown bag wrote: »

This is the problem really. All this ****e about appeasing the "markets" with cuts and taxes is beside the point. People talking about how the markets will react to such and such a decision fail to realise that its basically free money on a one horse race, why would they lower the rate. Betting on Ireland is the equivalent of betting on chelsea to win the premier league with 5 games to go and with them 16 points clear of their nearest rivals. High borrowing interest = more cuts and money taken out of our economy to pay for it = prolonged stagnation = more borrowing = risk free money for the bond holders as they know an EU country wont default. They know there's a big pot of EU money to cover the bonds when we need to be bailed out. Why would they care about the irish economy when there is already money put aside to pay them.

The EU will eventually be left with 2 choices, cut countries like ireland loose or implement euro wide regulation of bond markets with the EU setting low rates at which euro countries borrow. Those who want to sell debt outside of the regulated price should run the full risk of default with those operating inside the regulated prices getting priority repayments. Let the high interest lenders take the higher risk.

The ECB is currently buying Irish bonds as a stop gap measure. I can't see them cutting Ireland loose in the long run. The second option should be the way to go.

http://www.independent.ie/business/irish/ecb-bought-irish-bonds-traders-say-2399021.html

ei.sdraob

"tis da ebbs and flows of the market" - Brian Cowen


:rolleyes: no Brian tis an indicator of how much you and your party has screwed up this country so far and for a long time into the future

Fat_Fingers

Battleneter wrote: »

Are you sure you guys aren't reading to much into government bonds.

Austruckenfailer supposedly has one of the strongest economies in the OECD atm and there rate has been over 5 all year and close to 6 in April. Seems the smaller economies are paying more atm, NZ is another about 5.1 both countries have fairly low public debt.


Where the US which is in the toilet atm is only 2.5, no one here can seriously say confidence in the US economy is high.

Yes USA is in the toilet and has been for long time. But they are the only country that pays its debt in its own currency which they can print as much as they want.
Dollar is worthless in real sense. If China is to go tomorrow and cash in their IOU’s US would be bankrupt.

yermanoffthetv

ei.sdraob wrote: »

"tis da ebbs and flows of the market" - Brian Cowen


:rolleyes: no Brian tis an indicator of how much you and your party has screwed up this country so far and for a long time into the future

Damn right. Hes still preaching on to the brainwashed FFers thatll support him to the death anyway :rolleyes: Its clearly evident that we cant cut our way out of this. Tackling unemployment and creating jobs should have a higher priority than meeting the 3% deficet requirement. The more we cut the lower the tax returns will be and the vicious circle will continue. Think its time we had a little sit down with the eurocrats and beg for mercy on the timescale.

GSF

I thought anything over 7% was game over for Ireland. It was for Greece. So is it only because Ireland is not actively borrowing at the moment that we aren't being bailed out right now?

Yag reuoY

clown bag wrote: »

This is the problem really. All this ****e about appeasing the "markets" with cuts and taxes is beside the point. People talking about how the markets will react to such and such a decision fail to realise that its basically free money on a one horse race, why would they lower the rate. Betting on Ireland is the equivalent of betting on chelsea to win the premier league with 5 games to go and with them 16 points clear of their nearest rivals. High borrowing interest = more cuts and money taken out of our economy to pay for it = prolonged stagnation = more borrowing = risk free money for the bond holders as they know an EU country wont default. They know there's a big pot of EU money to cover the bonds when we need to be bailed out. Why would they care about the irish economy when there is already money put aside to pay them.

The EU will eventually be left with 2 choices, cut countries like ireland loose or implement euro wide regulation of bond markets with the EU setting low rates at which euro countries borrow. Those who want to sell debt outside of the regulated price should run the full risk of default with those operating inside the regulated prices getting priority repayments. Let the high interest lenders take the higher risk.

Your avatar sums up the situation so fittingly.:pac:

Sand

I thought anything over 7% was game over for Ireland. It was for Greece. So is it only because Ireland is not actively borrowing at the moment that we aren't being bailed out right now?

Ireland has enough cash in the wallet to keep us going till April 2011. After that the arse falls out of the whole scheme because public sector workers will start getting famed promissory notes instead of euros for their wages.

Ireland is locked out of the markets at 7% borrowing. Either Ireland credibly recovers before April 2011...or the insiders in Ireland are done. Everyone else wont notice much difference, but the civil servants, politicians, trade unionists and assorted useless hangers on will run straight into a brick wall.

Mr.Micro

Sand wrote: »

Ireland has enough cash in the wallet to keep us going till April 2011. After that the arse falls out of the whole scheme because public sector workers will start getting famed promissory notes instead of euros for their wages.

Ireland is locked out of the markets at 7% borrowing. Either Ireland credibly recovers before April 2011...or the insiders in Ireland are done. Everyone else wont notice much difference, but the civil servants, politicians, trade unionists and assorted useless hangers on will run straight into a brick wall.

Can't see credibility returning by April 2011, especially with Biffo at the helm. The markets wont buy it either. Its of course not about any of that..its all about the survival of the FF at all costs.....hoping that the longer the Government hangs on things might get better. All this before an austere budget as well and poor FF will be even more unpopular.

rumour

GSF wrote: »

I thought anything over 7% was game over for Ireland. It was for Greece. So is it only because Ireland is not actively borrowing at the moment that we aren't being bailed out right now?

Have a look around, we've withdrawn from the bond markets (do you really think Cowen & Co. made this profound decision with only enough cash to keep a country on the road for less than six months???), our minister has the cabinet in for the Bank Holiday weekend there're all in place when he gets in from Brussles and when the work is done immediately back to Brussels.

What makes you think we are not in the middle of the bailout right now.

The_Thing

Sand wrote: »

Ireland has enough cash in the wallet to keep us going till April 2011. After that the arse falls out of the whole scheme because public sector workers will start getting famed promissory notes instead of euros for their wages.

I'll have to go back to farming full-time in April then

johnboy_123

rumour wrote: »

Have a look around, we've withdrawn from the bond markets (do you really think Cowen & Co. made this profound decision with only enough cash to keep a country on the road for less than six months???), our minister has the cabinet in for the Bank Holiday weekend there're all in place when he gets in from Brussles and when the work is done immediately back to Brussels.

What makes you think we are not in the middle of the bailout right now.

I think you may over estimate our government the current shower have not got a financial Decision right in over a decade...So if they have pulled out of the markets and have enough till April well they are spot on as there will be a general election before then so Cowen has enough to give the lads a good auld last xmas bash on the tax payer

Amhran Nua

Fat_Fingers wrote: »

Yes USA is in the toilet and has been for long time. But they are the only country that pays its debt in its own currency which they can print as much as they want.
Dollar is worthless in real sense. If China is to go tomorrow and cash in their IOU’s US would be bankrupt.

China owns a grand total of seven percent (7%) of US debt. The USD is the de facto currency for international trade, that's why they get good rates.

rumour wrote: »

(do you really think Cowen & Co. made this profound decision with only enough cash to keep a country on the road for less than six months???)

Pretty much.

Mr Benevolent

Currently 6.925%.

Edit: The Bloomberg figures are ridiculously out of line - the GIGB10YR:IND has gone beyond 7% several times over the last 3 months and isn't recorded anywhere on that chart.

Count Dooku

How it looks from markets

GNP = 93 Bn
Subtract 22 Bn of external borrowings * 1.4 (conservative multiplier)

Without borrowings GNP will be about 55-60 Bn

Current expenditure 53 Bn, which means that if country will reduce deficit to 3%, then all private sector income must be taken for welfare and PS payroll bill

Solution one - increase taxes
Will kill all business activities and GNP will fell further

Solution two - cut expenditure
Not possible in country ruled by populists and PS unions

Question
Why lend money to Ireland, if it will be expelled from euro by 2014?

Triangla

Solution 3: Borrow from the pension reserve fund at whatever rate we want.

If the market was really that skittish about our bonds they simply wouldn't buy them. They know we need the dough so are charging a premium and laughing all the way to the bank. It's their job to get as high a return as possible.

3DataModem

When we talk about 'expelled from Euro' I think we are basically looking at a two-teir currency where the government are forced to pay PS workers and welfare in Bart-Bucks but anyone who can transact in a major currency (USD, EUR, GBP) will do so.

Hopefully the banks will convert private debt to Bart-Bucks so my 300k EUR mortgage becomes 300k BART-BUCKS and then as the BART-BUCK falls against the Euro (which it will) then my mortgage will disappear down a hole. I guess the bank I owe it to will disappear then too.

transylman

Government income currently around 30 bn a year. Expenditure around 50 bn a year. Thats a deficit of roughly 20 bn a year. Interest rate of 6.5% on the deficit means 1 bn is added to government expenditure each year. Debt/GNP ratio is already over 100%. Even with cuts of 5 billion the deficit next year will still be at least 16 bn, and with an interest rate of 7% that will still be 1 bn interest on the loans. Reality of the situation is without a fast recovery of the global economy we are looking at EU/IMF intervention, and even with a recovery there is still a high likelihood that the IMF will need to get involved. After that who knows what will happen, expulsion from the euro perhaps.

Thanks FF, thanks a lot.

johnboy_123

I like the Bart books idea

The only way is up.

Irish bonds reached 7.1% today.

VALUE: 7.141

_Kaiser_

Sand wrote: »

Ireland has enough cash in the wallet to keep us going till April 2011. After that the arse falls out of the whole scheme because public sector workers will start getting famed promissory notes instead of euros for their wages.

Ireland is locked out of the markets at 7% borrowing. Either Ireland credibly recovers before April 2011...or the insiders in Ireland are done. Everyone else wont notice much difference, but the civil servants, politicians, trade unionists and assorted useless hangers on will run straight into a brick wall.

Am I wrong to want to see this happen because it might FINALLY force a change in our "Ah sure it'll be grand" approach to EVERYTHING

We as citizens and taxpayers deserve, and should demand better, and if it took something like this to bring that about it'd almost be worth it?

_Kaiser_

Deleted User wrote: »

The only way is up.

Irish bonds reached 7.1% today.

VALUE: 7.141

And (un)surprisingly not a mention of this or the consequences (despite all the coverage about how important the markets are to our economy) on the main 6.1 news! :rolleyes:

Might as well just rebrand RTE while they're doing the ESB/Gas/FAS.. State News Agency anyone with new Red logos? :mad:

gleep

And still no mention on RTE today..........even Breaking News have it FFS.

Absolutley. Shameless.

maninasia

Triangla wrote: »

Solution 3: Borrow from the pension reserve fund at whatever rate we want.

If the market was really that skittish about our bonds they simply wouldn't buy them. They know we need the dough so are charging a premium and laughing all the way to the bank. It's their job to get as high a return as possible.

Isn't it likely the 'market's are also playing this for what it's worth, pushing the yield up as high as they can for maxium gain, I think the ECB will back them up or am I wrong?

EDIT- Ok maybe not, this could be the main reason yields are increasing to 7% and beyond
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8100412/Angela-Merkel-consigns-Ireland-Portugal-and-Spain-to-their-fate.html

Amhran Nua

So taking on the banks' debts and trying to play a shell game by hiding them in NAMA didn't fool the markets? What a surprise. Have we any reason at all to continue with the guarantee, at least insofar as it pertains to bondholders? Clearly they aren't convinced that the guarantee holds any water, or just don't care, so lets withdraw it and go straight to a simple debt for equity swap, which is what should have been done in the first place.

ardmacha

Clearly they aren't convinced that the guarantee holds any water, or just don't care, so lets withdraw it and go straight to a simple debt for equity swap, which is what should have been done in the first place.

Exactly. The government needs to make sure that the banks retail depositors do not lose out. The need to make sure that that people who bought regular Irish government bonds do not lose out. If there isn't enough left, then they do not need to make sure that bond holders in private banks are fully compensated. There isn't enough to go around, so the latter has to go.

MagicSean

joe316 wrote: »

Currently the 10 year bond rate is at 6.95% as of 8:30am and rising fast. I thought 6% was a watershed, the markets have no confidence in us getting out of this mess (not that I thought zanu FF would either)

Talk about depressing

http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

I wouldn't mind gettin in on that myself. Maybe the government should have sold some bonds to it's citizens. Let us make personal sacrifices to fund our own recovery with the knowledge that we will have something at the end of it all should we do a good job.

rumour

ei.sdraob

rumour wrote: »

What is interesting is how the NTMA head poncho trying to spin this event as if its a nonevent saying we had high rates like this in 90s

Yes except we also had our own currency and rates back then....

Mr Benevolent

Closed today at 7.304%. If it's this high now, what'll it be when we go back into the bond market?

Sand

ardmacha wrote: »

Exactly. The government needs to make sure that the banks retail depositors do not lose out. The need to make sure that that people who bought regular Irish government bonds do not lose out. If there isn't enough left, then they do not need to make sure that bond holders in private banks are fully compensated. There isn't enough to go around, so the latter has to go.

The problem here is that a lot of the bondholders who should have been burnt back in 2008 have been paid out, using cash borrowed from the ECB, borrowing that was underwritten by state guarantees.

The private investors who took the risks are out of the game, courtesy of the Irish taxpayer whose been left holding the loss. Unfortunately...we're the bondholders now.

The net effect of Lenihans schemes have been to turn a private loss of German banks that invested in Irish banks into a public loss of the Irish state...where we must crawl to Germany, of all people, for forgiveness for our feckless ways, having bankrupted ourselves rescuing the German banks...its hilarious when you think about it. If the 2003-2008 wasnt economic treason, then 2008 to 2010 certainly has been.

rumour

ei.sdraob wrote: »

What is interesting is how the NTMA head poncho trying to spin this event as if its a nonevent saying we had high rates like this in 90s.

Is it at all surprising. There is a thread here about confidence incivil servants, the shear volume of shameless spin a prevarication is astounding.

No credibility until the budget and given we have dilly dallied with that now for two years I'm afraid balancing the books is the only option. 20bn idealy the markets would like it straight away and we'll plead for time adding to our lack of credibility.

Politically we are paralysed.

On a more commical note.

david75

A list of Anglos bond holders. just who is it we're paying off?

http://golemxiv-credo.blogspot.com/2010/10/who-are-bond-holders-we-are-bailing-out.html

Amhran Nua

Sand wrote: »

The problem here is that a lot of the bondholders who should have been burnt back in 2008 have been paid out, using cash borrowed from the ECB, borrowing that was underwritten by state guarantees.

All that means is the ECB should have been more cautious about making the same mistakes as German banks, we can write that debt off too. Since we are unlikely to receive a great deal more from them one way or the other, its pretty much a take it or leave it situation.

Amhran Nua

david75 wrote: »

A list of Anglos bond holders. just who is it we're paying off?

http://golemxiv-credo.blogspot.com/2010/10/who-are-bond-holders-we-are-bailing-out.html

Maybe you should open a new thread on this, if it hasn't already had one, its quite important.

Byron85

Bonds hit 7.4% today.

Sand

Amhran Nua wrote: »

All that means is the ECB should have been more cautious about making the same mistakes as German banks, we can write that debt off too. Since we are unlikely to receive a great deal more from them one way or the other, its pretty much a take it or leave it situation.

My point is that back in 2008 it would have been Anglo/AIB/BoI defaulting on their obligations to German banks.

Now its the Irish state defaulting on our obligations to the European Central Bank.

That has been the net effect of government policy over the past 2 years. *Their* problem has suddenly turned into *our* problem.