Clearing house warning to Irish bond traders

gleep

OK, I was sceptical about the so called "inevitability" of IMF intervention, after reading this in the FT, I think they'll be passing Santa Claus on the way in:(

This is ominous stuff, and is a reaction to LIEnihan's announcement of €6Bn cuts today. Goodbye soverignty, hello IMF.

http://www.ft.com/cms/s/0/3af7e838-e847-11df-8995-00144feab49a.html#axzz14LTvF6C1

Shame this will not be reported by our own media, who are clueless.

Fears over the health of the eurozone bond market intensified after one of Europe’s biggest clearing houses warned investors they could be compelled to stump up substantially more money to trade in Ireland’s debt.
LCH.Clearnet told members they might be required to deposit more cash to trade in Irish sovereign bonds, a move that is being widely interpreted as a signal that the organisation will act next week.


Such a curb would be a blow to the Irish debt market and comes amid growing concerns over the fragility of the euro*zone’s peripheral economies.
Ireland and Spain were on Thursday removed from a list of countries in which Russia’s $130.9bn sovereign wealth funds is permitted to invest, according to the Russian finance ministry’s website. Norway’s $520bn fund said the past few weeks had seen Spanish debt grow significantly less attractive.
“The warnings by sovereign wealth funds creates even more uncertainty in the eurozone,” said Nigel Rendell, senior strategist at RBC Capital Markets. “These funds are big players in the markets and can influence sentiment.”
LCH.Clearnet has contacted members in the past few days to say that, under newly introduced rules, it has the power to impose a 15 per cent “haircut”, a cash deposit to help indemnify against default risk, against Irish bonds if it determines that the risk of the Irish government defaulting has increased.
A spokesperson for the clearing house said: “We have the ability to do so should we decide to do so.”
Any move by LCH.Clearnet to increase Irish debt margin requirements could undermine the Irish banking system.
Irish 10-year yields rose for the eighth day on Thursday, jumping 19 basis points to a fresh record of 7.49 per cent since the launch of the euro.
Steven Major, global head of fixed income research at HSBC said LCH was sending a warning to financial markets: “It is another blow for Ireland and the eurozone and underlines the nervousness among investors over the health of the peripheral economies.”
Spreads on peripheral Eurozone debt have continued to widen in spite of buying from European Central Bank, said traders. Greek 10-year bond yields jumped 0.3 percentage points to 11.05 per cent on Thursday. Portuguese 10-year yields also rose 0.3 percentage points to 6.47 per cent. Spanish yields were marginally higher.
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ashleey

Angela Merkel had better get her cash point card out and start depositing money into the EFSF as there's going to be a lot of calls

fedor.2.

ah jaysus

Sand

I dont think its in reaction to the 6 billion cuts. Thats just a footnote on the growing recognition of the inevitability of default. The markets recognise it as the only sensible course of action for Ireland to make, and theyre just pricing it in.

gleep

Sand wrote: »

I dont think its in reaction to the 6 billion cuts. Thats just a footnote on the growing recognition of the inevitability of default. The markets recognise it as the only sensible course of action for Ireland to make, and theyre just pricing it in.

Agreed, maybe not. What I meant to say was Lie-nihan's masterplan to restore confidence among the markets hasn't worked, and won't work. Our tax take will fall and the deficit widen.

thebman

With proper management, we could still restore confidence enough to borrow before April next year TBH.

Its unlikely to happen given we will likely have an election in this time :-/

Sticky_Fingers

thebman wrote: »

With proper management, we could still restore confidence enough to borrow before April next year TBH.

Its unlikely to happen given we will likely have an election in this time :-/

An election is exactly what we need, the markets are spooked that the upcoming budget is the governments death rattle. We need an election now to clear the deck and install people who have a mandate for four years to do what needs to be done. Every day FF deny the people an election they are costing the state and its citizens precious time to sort ourselves out before we go back to the markets.

Why are they doing this, what is the logic behind it, everyone knows their goose is cooked yet they clinging on for dear life. It is obvious to the dog on the street that they are a lame duck government that no longer has any power, no one has an ounce of respect for them and their grand plan.

This country is on the rocks, an election may not save the ship and we will more then likely be crawling into the IMF lifeboat at least we can say that we tried to save ourselves.

*Reading that back its all very nautical

dan_d

What is the logic behind the bond markets and these funds suddenly pulling this move?What has happened in the last week in Ireland to cause this?
As I posted in another thread I'm not entirely convinced that this one is directly of our own making...I think Germany is rattling the cage in Europe and causing this 'nervousness'

Liam Byrne

thebman wrote: »

With proper management, we could still restore confidence enough to borrow before April next year TBH.

Its unlikely to happen given we will likely have an election in this time :-/

The only way to achieve even half-decent management is to have said election.

Inquitus

thebman wrote: »

With proper management, we could still restore confidence enough to borrow before April next year TBH.

Its unlikely to happen given we will likely have an election in this time :-/

Its highly amusing that you imply that Labour or FG are proper management, if anything the policies they espouse are even worse than what FF is doing at the moment. We have no credible mainstream political party, at least FF are unpopular enough to not be encumbered by dreams of re-election, and as such are doing some of the things that need to be done.

ashleey

The time for tinkering with 1% here and 2% there is long gone. That's why FF have lost credibility. They have ignored the quango cull and actually added some (NAMA). Time to look at serious reform

Liam Byrne

Inquitus wrote: »

Its highly amusing that you imply that Labour or FG are proper management, if anything the policies they espouse are even worse than what FF is doing at the moment.

That's funny, because I read that post that you quoted as meaning the complete opposite!

Inquitus wrote: »

We have no credible mainstream political party, at least FF are unpopular enough to not be encumbered by dreams of re-election, and as such are doing some of the things that need to be done.

What, exactly, are FF doing ?

They are refusing point-blank to do the big things that affect their main support base and screwing the rest of us.

2 years of tinkering and mismanagement has made matters worse; where would we have been if the party that led us into this mess had been kicked out and a decent, ethical government installed ?

southsiderosie

dan_d wrote: »

What is the logic behind the bond markets and these funds suddenly pulling this move?What has happened in the last week in Ireland to cause this?
As I posted in another thread I'm not entirely convinced that this one is directly of our own making...I think Germany is rattling the cage in Europe and causing this 'nervousness'

Because Lenihan said that they were making the budget figures public, and the markets are guessing it is going to be an absolute bloodbath. Not to mention the fact that the government has been fiddling with the figures for the last 3 years, and investors are fed up.

ashleey

And now Lenny has turned even more Enron like by deferring the interest on the promissory notes for 2 years to massage the current figures. It's getting more convoluted every time they try to bring 'finality'

oppenheimer1

Liam Byrne wrote: »

That's funny, because I read that post that you quoted as meaning the complete opposite!



What, exactly, are FF doing ?

They are refusing point-blank to do the big things that affect their main support base and screwing the rest of us.

2 years of tinkering and mismanagement has made matters worse; where would we have been if the party that led us into this mess had been kicked out and a decent, ethical government installed ?

Like what Liam? They are planning on hiking student registration fees. They cut the dole. They introduced levies on the public service. They increased vat. They are going to introduce property and water charges. The only group they backed away from was the pensioners and I've a feeling they're going to be hit this time. That encompasses almost all of the people on this island, so who are the coterie they are protecting that is going to get them re elected?

The main support base was the avrage man on the street and they have hammered them in the last two years and will continue to do so.

rumour

southsiderosie wrote: »

Because Lenihan said that they were making the budget figures public, and the markets are guessing it is going to be an absolute bloodbath. Not to mention the fact that the government has been fiddling with the figures for the last 3 years, and investors are fed up.

I think your last point is the issue. For all intensive purposes investment in ireland is closed. The only credible method open to us is to prove we can live within our means. i.e. prove you can live without borrowing.

We are making no tangible attempts to do this.

1. Croke Park Agreement
2. Refusing bi-elections
3. Curious media rumours 6bn cuts this year followed by 9bn and 9bn
4. We are frontloading the pain??? How does that sit with the above.

Conclusion politically incapable of deliverying control.

I think the secondary bond market has been gambling that irish default will be ultimately paid by a rescue fund. The risk with this tactic is growing daily especially (and Dan_d i think is right) as Merkel is proposing quite vocally that governments will not pick up the tab. Who then? That is what I believe is causing the panic.

Dr. No

What difference will an election make anyway? The bond markets have more of a say in running the country than the Irish people.