The Rise and Fall..and Rise...of Irish Bond Rates

Scofflaw

Irish 10-year bond rates have fallen for the 4th consecutive day since the announcement of the stress test results last Thursday.

Date|Open|High|Close
31/03|10.12|10.322|10.223
01/04|10.16|10.332|9.978
04/04|9.992|10.066|9.81
05/04|9.787|9.901|9.683

Currently, rates are at about 9.3%, having fallen pretty consistently through the day.

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

Early days yet, of course, but still nice to see.

cordially,
Scofflaw

later12

But margins have increased on Irish paper as well! LCH announced their margin up about four days ago. It's expensive to shift around, therefore the paper gets less bumpy and this promotes a perceived short term confidence.

The stress test helped, but only on short term positions.

We should not be mistaken or fooled into thinking that funds are now going long on Ireland. I'd love to believe that, but it isn't the case.

ei.sdraob

Year and half left before we are back to the "wolves" as they where called :P

at least 5 more % points to go in that direction or we back to IMF/EU for more loving.

Scofflaw

later10 wrote: »

But margins have increased on Irish paper as well! LCH announced their margin up about four days ago. It's difficult to shift, therefore the paper gets less bumpy and this promotes a short term confidence.

The stress test helped, but only on short term positions.

We should not be mistaken or fooled into thinking that funds are now going long on Ireland. I'd love to believe that, but it isn't the case.

Sure, although it's also fair to point out what LCH said:

"This decision is based solely on publicly available yield spread data and in no way represents a forward looking market view," LCH.Clearnet said in a statement on its website, adding it will continue to monitor yield spreads closely and keep the parameters under close review in accordance with its Sovereign Credit Risk Framework.

The clearing house last raised the margin requirement on Irish bonds on March 24. Since then the 10-year spead over benchmark German Bunds has risen around 20 basis points to 690 bps.

If today's drop holds, that 690 basis points will have dropped about 10% in a few days.

cordially,
Scofflaw

fred252

Scofflaw wrote: »

Irish 10-year bond rates have fallen for the 4th consecutive day since the announcement of the stress test results last Thursday.

Date|Open|High|Close
31/03|10.12|10.322|10.223
01/04|10.16|10.332|9.978
04/04|9.992|10.066|9.81
05/04|9.787|9.901|9.683

Currently, rates are at about 9.3%, having fallen pretty consistently through the day.

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

Early days yet, of course, but still nice to see.

cordially,
Scofflaw

what about the 2 year bonds? and where do see the rate? (can't find it on the iseq website)

thanks

Scofflaw

fred252 wrote: »

what about the 2 year bonds? and where do see the rate? (can't find it on the iseq website)

thanks

Sorry - you can get the 2-year rate (also falling) here: http://www.bloomberg.com/apps/quote?ticker=GIGB2YR:IND

cordially,
Scofflaw

Marcusm

I cannot believe that there s anything other than a very thin trade in Irish government debt such that I think there is little evidence to support any alteration in underlying yields.

Dannyboy83

Marcusm wrote: »

I cannot believe that there s anything other than a very thin trade in Irish government debt such that I think there is little evidence to support any alteration in underlying yields.

It may change tho.

http://www.businessworld.ie/livenews.htm?a=2758823
Morgan Stanley sees Irish bonds as a buy

Amazing what a bit of fecking honesty competence can do.

later12

What fun we shall have over the next week

ei.sdraob

And backup the go so, up to 9.7%

Its "da ebbs and flows" they say

Monty Burnz

Scofflaw wrote: »

Early days yet, of course, but still nice to see.

The problem with this is that it's simply a reflection of how likely the market thinks it is that we will spend the coming decades cutting our public services to the bone and taxing ourselves into oblivion to repay the nationalised debts of the banks.

Looks like they think we are really going to crucify ourselves. Whoop-dee-doo.

Scofflaw

ei.sdraob wrote: »

And backup the go so, up to 9.7%

Its "da ebbs and flows" they say

That'll be the Moody's downgrade, I imagine.

cordially,
Scofflaw

Delancey

When will the bailout funds run out ? , by that I mean when will the Irish government have to return to the Bond Markets to fund day-to-day spending ?

Anonymous1987

Depends on achieving projected expenditure cuts and tax revenue. In addition there seems to a shortfall of between €11.5bn to €17.5b even under current plans so it will likely be before 2013.

Scofflaw

Anonymous1987 wrote: »

Depends on achieving projected expenditure cuts and tax revenue. In addition there seems to a shortfall of between €11.5bn to €17.5b even under current plans so it will likely be before 2013.

As far as I know, the idea is a return in late 2012:

The European Commission is banking on Ireland being able to return to the debt markets in the second half of 2012, at least a year earlier than many traders had forecast.

In an occasional paper published this week, the Commission calculates that Ireland will have drawn down €30bn ($40bn) of the €50bn earmarked under a rescue by the European Union and International Monetary Fund by the end of this year. The Commission said €17bn will be disbursed in 2012 and the rest the following year.

Source: http://www.ft.com/cms/s/0/03638de0-35ff-11e0-9b3b-00144feabdc0.html#ixzz1Jj8luqph - but various others.

cordially,
Scofflaw

zig

This reminds me of a few months ago when Portugal's bond rates dropped off a bit, they managed to sell bonds and the Portuguese media ,not to mention the Irish media, RTE ahem, were practically jumping with joy, when all it was was an obvious retracement in an upwards graph.

That said, I cant see the Irish ones climbing too much further , theyll probably level off where they are now for a good while, I dont think they'll drop properly till our unemployment rates fall. Hopefully sooner rather than later.

Anonymous1987

For those interested here is the 5 year CDS for Irish sovereign debt:

http://www.bloomberg.com/apps/quote?ticker=CT777651:IND

At present our CDS's are trading below both Portugal and Greece (1,154 and 598 respectively versus Ireland's 570) and the fluctuations in bond yields are reflected here.

ei.sdraob

10.5% now for the 10 year

Greece is gone of on a tangent altogether

z0oT

ei.sdraob wrote: »

10.5% now for the 10 year

Greece is gone of on a tangent altogether

If you think Greece's 10 year is among the clouds, just look at the 2 year.

http://www.bloomberg.com/apps/quote?ticker=GGGB2YR:IND

questionmark?

z0oT wrote: »

If you think Greece's 10 year is among the clouds, just look at the 2 year.

http://www.bloomberg.com/apps/quote?ticker=GGGB2YR:IND

:eek:



I think the Irish rates are irrelevant at the moment because its just a matter of when, not if Spain falls. Spain going to the EU/IMF with the begging bowl will more than likely bring down the Euro and then we are into a whole new ball game IMHO

Scofflaw

The respite, such as it was, was short-lived indeed!

cordially,
Scofflaw

jank

Looks like a Greece debt restructure is on the cards in days rather then weeks...
Give it two years and it will be Irelands turn.

rumour

As a matter of interest does anyone here know the implications of S&P's warning on american sovereign debt. They have put a warning on the triple AAA rating. Seems not so long ago that was being said here. For nearly 18months the weiss institute has been saying that the states is in a worse situation than europe.

Where is this headed? Two weeks ago I think an article appeared in the Irish times from an australian professor describing a recent conference at Bretton Woods as a prelude to a forthcoming IMF summit, the main topic as I understand it is the replacement of the dollar as the worlds reserve currency.

The reason I am asking is that any hope Ireland has(IMO) of getting out of our current predicament is intrinsically constrained by these events.

Indeed any plan to ameliorate our circumstances should be in this context, of which there is entirely no discussion.

Brussels Sprout

rumour wrote: »

the main topic as I understand it is the replacement of the dollar as the worlds reserve currency.

with what?

Voltex

Brussels Sprout wrote: »

with what?

Yuan!!!...and Im not joking!!

Voltex

rumour wrote: »

As a matter of interest does anyone here know the implications of S&P's warning on american sovereign debt. They have put a warning on the triple AAA rating. Seems not so long ago that was being said here. For nearly 18months the weiss institute has been saying that the states is in a worse situation than europe.

Where is this headed? Two weeks ago I think an article appeared in the Irish times from an australian professor describing a recent conference at Bretton Woods as a prelude to a forthcoming IMF summit, the main topic as I understand it is the replacement of the dollar as the worlds reserve currency.

The reason I am asking is that any hope Ireland has(IMO) of getting out of our current predicament is intrinsically constrained by these events.

Indeed any plan to ameliorate our circumstances should be in this context, of which there is entirely no discussion.

TBH..I think this needs to be kept in context. I think S&P are sounding warnings that the US cant keep on this deficit corse indefenitley and that at some stage a reduction will be required. Id like to meet the man who bets against the USA and its economy!! We challenged the aul adage that when the USA sneezes the rest of the World catches a cold..yet when Lehmans went..we went into meltdown.

Delancey

I think it highly unlikely that any rating's agency will actually downgrade US Sovereign debt anytime in the near future , that said the recent warning should not be ignored - to date the US has seemed utterly incapable of dealing with its deficit , this situation cannot continue and it is already clear that investors are losing confidence in the US $ .

Just look at the price of gold , India for example has bought a lot of Gold in the last 2 years , while doubts remain about the $ gold will remain in favour.

I'm not convinced that we are not actually witnessing the end of the so-called ' American Century ' - what was once an industrial powerhouse now seems to demolish it's factories and build shopping malls in their place - shopping malls that sell for the most part imported goods.

ei.sdraob

Voltex wrote: »

Yuan!!!...and Im not joking!!

The Yuan is pegged to dollar,therefore the Yuan is the dollar

jmayo

Voltex wrote: »

Yuan!!!...and Im not joking!!

And what about the level of US debt the Chinese are carrying ?

A bigger joke though would be to make the Euro the worlds reserve currency. :rolleyes:
BTW are CBs still stockpiling CAN$ and AUS$ ?

rumour

Voltex wrote: »

TBH..I think this needs to be kept in context. I think S&P are sounding warnings that the US cant keep on this deficit corse indefenitley and that at some stage a reduction will be required. Id like to meet the man who bets against the USA and its economy!! We challenged the aul adage that when the USA sneezes the rest of the World catches a cold..yet when Lehmans went..we went into meltdown.

I agree mostly but at the minute with QE, its out of control.If you think our guys are bad the states are printing money at an exponential rate and firing it at everyone. Its only a confidence step away from fraud.

The yuan has become topical but if america keep at this they are defrauding the chinese. If I paid you some thing in return for your hard labour today and it turned out to be worthless tomorrow you'd be pretty pissed off. Having said that what can the chinese do there's nowhere else to sell their stuff?

Looking past that all I can see is trade barriers, which is something ireland should at least have a provisional plan for.

I'm still not sure what to make of S&P's warning. They have a credibility problem, but they still are in the business of making money. What made them issue the warning. Following events over the last few years the three main agencies ratings were always driven by the market. Now I don't know if its the tail wagging the dog but they always seem months behind pragmatic examination of the figures which translates into market action.

It seems hard to imagine the states economy faltering but hey they have a budget deficit and a democrat government. Its like labour or FF cutting PS pay. Maybe thats a bit hard as i don't think modern democracy rewards honesty. Much easier to criticise your opponent, promise how you'd do things differently to get power and then wing it when you have the power.

Anonymous1987

China actually called for special drawing rights (a weighted basket of currencies used by the IMF) to replace the USD as the world's reserve currency in 2009. The argument the dollar's maintenance of its position as the world's reserve currency is made here:

The dollar has maintained this role over the years, despite substantial fluctuations in its exchange value, because the size, sophistication, and relative stability of the US economy generally render the costs of transacting in US dollars lower than the costs of transacting in currencies that do not equally share these characteristics. In large part, the widespread use of the dollar developed and continued because the US has been the largest, most broad-based exporter and importer in the world. With a lot of Americans trading globally, a lot of dollars will naturally change hands. Because traders must finance a large portion of their business in US dollars, they maintain accounts, seek loans, and undertake myriad other financial arrangements in dollars.
A strong and open US financial system helped facilitate the dollar’s international use. While a high degree of feedback naturally exists between the dollar’s expanding role in trade and the growth of an accommodating financial structure, US financial markets have always been innovative and relatively free of cumbersome regulations. Their breadth and depth enhances the liquidity of dollar-denominated assets. Moreover, as dollar trade expands and US financial markets grow, more and more foreign financial firms – even ones not located in the US – offer dollar-denominated products. All this makes holding dollars convenient and transacting in dollars relatively easy.
As the global network for dollars expands, the benefits of using the dollar in exchange rise. The process is self-reinforcing. Moreover, once the network benefits of a particular currency become substantial, people are prone to continue using it, even if viable competitor exists. The debate on the SDR’s possible challenge to the dollar echoes many of the points made in the dollar-vs-euro debate. The euro matches many of the dollar’s qualities, and its use continues to expand. Making the jump to a new international currency, even one as widely used as the euro, requires a substantial proportion of people to make the jump in close concert. Otherwise, the network benefits are lost. For that reason, the world is not likely to shift quickly away from dollars even if the SDRs become a new international-reserve option.

http://www.voxeu.org/index.php?q=node/3538

So to summarise, the benefits of using a reserve currency increase with the number of users of that currency. At present the Euro presents the greatest challenge to the dollar, see below. The Yuan doesn't register at all, the world would sooner use the Pound Sterling or Yen.



This would suggest firstly that a change in the worlds reserve currency is very unlikely anytime soon and would likely be a gradual process. Secondly the Euro is the main competitor reserve currency not the Yuan or even SDR's.

later12

Talk about a bad news day; Sadlers Wells is dead, we are bailing out an Insurance company, and now this!

http://www.bloomberg.com/news/2011-04-26/german-government-note-yields-approach-one-month-low-on-demand-for-safety.html

Ireland’s two-year yield reached a euro-era record 12.08 percent after the European Union said the nation’s debt burden surged the most in the currency area last year.

Mind you, this is Greece's moment to, er, shine...

Greek two-year yields have climbed almost 870 basis points this month, reaching 24.45 percent today as investors priced in losses, or so-called haircuts, they may incur in the event of a restructuring. Lars Feld, a member of German Chancellor Angela Merkel’s council of economic advisers, said Greece cannot avoid restructuring its debts.

ei.sdraob

Its almost May, time for the now annual euro crisis :pac:

rumour

This paints a pretty picture from Weiss ratings...look at the position of Ireland.
http://weissratings.com/ratings/sovereign-debt-ratings/?csm=3009983

fred252

10 Year = 10.5 %
2 Year = 12 %

to what do we owe this recent inversion?

Anonymous1987

fred252 wrote: »

10 Year = 10.5 %
2 Year = 12 %

to what do we owe this recent inversion?

To add to that:

3Yr 12.3%
4Yr 7.6%
5Yr 11.6%
6Yr 8.3%
8Yr 10.8%
9Yr 10.9%

Anyone have an explanation for this S shaped yield curve?

Scofflaw

Anonymous1987 wrote: »

To add to that:

3Yr 12.3%
4Yr 7.6%
5Yr 11.6%
6Yr 8.3%
8Yr 10.8%
9Yr 10.9%

Anyone have an explanation for this S shaped yield curve?

It looks not entirely unrelated to the maturity profile of our sovereign debt:

Year|Irish Government Bonds |Short Term Debt |Retail Debt |Other Debt |Liquid Assets |Total |Yield
2011|4585|6977|1083|1035|-16164|-2485|
2012|5770||1083|||6852|
2013|6055||1083|||7137|12.00%
2014|11882||1083|||12964|12.30%
2015|7||1083|66||1156|7.60%
2016|10169||5414|||15583|11.60%
2017|0|||||0|8.30%
2018|9282|||||9282|
2019|14490|||||14490|10.80%
2020|19581|||||19581|10.90%


cordially,
Scofflaw

ei.sdraob

11%

wylo

its becoming a bit of a joke really, this was ridiculously predictable, fair enough politicians need to buy time but if we keep going the same way Greece is going we'll be looking at 20% in a few months.

Scofflaw

wylo wrote: »

its becoming a bit of a joke really, this was ridiculously predictable, fair enough politicians need to buy time but if we keep going the same way Greece is going we'll be looking at 20% in a few months.

Based on extrapolating the remarkably steady rate of rise over the last 6-9 months, one could predict 12% in about September and 14% around the end of the year.

cordially,
Scofflaw

later12

Scofflaw wrote: »

Based on extrapolating the remarkably steady rate of rise over the last 6-9 months, one could predict 12% in about September and 14% around the end of the year.

Indeed. And that extrapolation would possibly be based on a continuous steady worsening of the European situation, yet could well be subject to an upward review based on some pretty significant externalities, like a Greek restructuring - or worse - a messy Greek restructuring and resulting issues with CDS calls.
Even with an orderly restructuring, loss of confidence on Irish debt and more frequent margin demands from clearing houses as we have been seeing this month could feature prominently in a rapid decline in our financial health.

So considering the sudden jolt that may lie up ahead, I wouldn't be very confident that the yield will rise steadily, it may be a whole lot faster than the phony war (in some respects) has been.

Scofflaw

later10 wrote: »

Indeed. And that extrapolation would possibly be based on a continuous steady worsening of the European situation, yet could well be subject to an upward review based on some pretty significant externalities, like a Greek restructuring - or worse - a messy Greek restructuring and resulting issues with CDS calls.
Even with an orderly restructuring, loss of confidence on Irish debt and more frequent margin demands from clearing houses as we have been seeing this month could feature prominently in a rapid decline in our financial health.

So considering the sudden jolt that may lie up ahead, I wouldn't be very confident that the yield will rise steadily, it may be a whole lot faster than the phony war (in some respects) has been.

Sure - after all, the rise of our rates has been on roughly the same steady gradient both before and after the IMF bailout, but jumped at that point to settle back to the same upwards gradient about 1% above where it would otherwise have been. That would suggest that there's an underlying and fairly steady growth in tension as well as the possibility of event shocks.

Also, of course, extrapolating from the Victorian era forward would have seen the world covered in a dense blanket of horse manure by now - but of course they didn't foresee the internet, which rendered most of that digital.

cordially,
Scofflaw

ei.sdraob

Be careful with the extrapolating up in a linear fashion business, that worked out well for the banks didnt it
tho' mind you all growth forecasts are strangely linear and upward too... something to think about.

Looking at Greece and their rise up to 11% and what followed,
might be what happens here, so far Ireland strangely followed Greece toe to toe despite having different issues and economy.

More than likely the Greek problem will be kicked yet again down the road for another year, when we all be back here again wondering what the future holds.

fred252

do you think the street protests in greece had much effect on their bond rates? i guess this is one reason why our rates haven't followed greece's skyward. although i assume the fact that our fiscal deficit is nowhere near as bad as theirs when you take away the banks

thebman

ei.sdraob wrote: »

Be careful with the extrapolating up in a linear fashion business, that worked out well for the banks didnt it
tho' mind you all growth forecasts are strangely linear and upward too... something to think about.

Looking at Greece and their rise up to 11% and what followed,
might be what happens here, so far Ireland strangely followed Greece toe to toe despite having different issues and economy.

More than likely the Greek problem will be kicked yet again down the road for another year, when we all be back here again wondering what the future holds.

Don't think it can be kicked further down the road. As part of their bailout package they are supposed to sell state assets and from the looks of it, this is completely unacceptable to the Greek people.

This is a stale mate and now a real solution is required.

fred252

Quick update;

2 year -> 14 %
10 year -> 12 %

http://www.bloomberg.com/apps/quote?ticker=GIGB2YR:IND&n=y
http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

later12

I wonder how useful the Irish bond yield figures now are, the market on Irish, Greek and Portuguese debt is sttruggling with very thin volumes, so you may be likely to see some (relatively) dramatic swings or exaggerated reactions.

If I were holding Irish debt I think I would just stick it in the back of the filing cabinet and hope for the best.

Delancey

The prospects of the Irish Government going back to the bond markets seem to be getting dimmer by the day.

ei.sdraob

later10 wrote: »

I wonder how useful the Irish bond yield figures now are,

Spain is now in same spot as Ireland was last year before we ended up with IMF/EU crockup, this version of "failure is not an option" neo-capitalism/socialism will endup destabilizing the whole continent

fred252

Quick update;

2 year -> 16.5 %
10 year -> 13 %

http://www.bloomberg.com/apps/quote?...IGB2YR:IND&n=y
http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

hmmm

There's feck all volume in Irish bond trading at the moment, and no bond issuance on the horizon - these figures are largely meaningless.