Who would buy Irish government bonds, but not Irish bank bonds

Justin Collery · 06-09-2010 08:01PM #1

Lots of people by the looks of it...

From yesterdays SBP:

http://www.thepost.ie/themarket/irish-retail-banks-have-583bn-in-ecb-borrowings-51438.html

"Irish retail banks have €58.3bn in ECB borrowings"

We are told that bond investors see Irish banks and the government as one and the same, however it seems this is clearly not true. The government still has the capacity to borrow on the bond markets, our banks do not (otherwise they would not need the ECB funding).

If the markets do start to look to the government and the banks as one and the same, we are screwed.

This sharade needs to stop.

thebaldsoprano · 06-09-2010 10:40PM

jcollery wrote: »

The government still has the capacity to borrow on the bond markets

Really?

Scarab80 · 06-09-2010 11:03PM

thebaldsoprano wrote: »

Really?

That's the ECB buying irish bonds from bondholders, not from Ireland. The ECB can't fund states directly.

Banks can get funding directly from the ECB, to the extent that they have appropriate loans to provide as collateral, and at a much lower rate than they can get on their bonds.

But then banks can buy irish bonds directly and can use these bonds as collateral to raise funds from the ECB.

As a poster on here said before, it's a financial merry go round.

Who would buy Irish government bonds, but not Irish bank bonds

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