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Irish bond prices

Sticky_Fingers

Note to mods: I realise there is a thread about this in politics but I feel it needs a much wider audience, this could be very important, it is not to cause a panic but to let people know the current situation
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I think people should be keeping an eye on the Irish bond price today and tomorrow. For those of you who haven't been following this basically Barclays Central came out with a report the other day with concerns about the Irish economy and our ability to service our debt. They suggested that we might have to get external help with restructuring our debt (that means IMF/EU bailout). This has made the markets very skittery and as it stands we are being charged 6.53% on our 10 year bonds.This could be very bad news since we are going to try and sell 1.5 billion of our government debt tomorrow and while we have financed 90% of our borrowing for this year and have some cash in the kitty this could be very serious for future government spending.

Please see here for thread on this topic in the politics forum:
http://www.boards.ie/vbulletin/showthread.php?t=2056035542

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orourkeda

Oliver bond

topper75

Do we have to borrow at all?

Would we be Albania if we just ran the country on tax take?

Is the assumption that we have to borrow parallel with the household assumption that we need to go to the credit union to buy an LCD TV and 4x4?

I'm not easy with the debt mentality. Never have been with the exception of infrastructure for countries or mortgages for households.

Sykk

There's only one bond you should be worried about

James Bond

Biggins

The bond issue this week is very, very important!
Its knife edge at the moment.

thebigbiffo

topper75 wrote: »

Do we have to borrow at all?

Would we be Albania if we just ran the country on tax take?

Is the assumption that we have to borrow parallel with the household assumption that we need to go to the credit union to buy an LCD TV and 4x4?

I'm not easy with the debt mentality. Never have been with the exception of infrastructure for countries or mortgages for households.

what would all those overworked civil servants do if we could only run the country on our tax take?

Micky Dolenz

I'll let this run for a little while to see how it goes.

skyhighflyer

The market price of our bonds is only based on the perception of risk of default, not the actual risk itself. The FT last weekend pointed out that Ireland has taken responsible steps to curb its expenditure and is being, for want of a better metaphor, picked on ruthlessly by the vultures of the financial markets who've already picked over Greece's corpse.

The problem is, once the markets have turned on you it's very difficult to restore confidence and scaremongering threads like this don't help.

It is also playing directly into the hands of investment bankers in London and New York who don't even own the underlying bonds and have taken out 'naked' credit default swaps on Irish debt. These guys stand stand to cash in big time if Ireland defaults.

This might sound a bit conspiracy theorist, but it can and does happen (Goldmans already got fined this year for selling debt obligations to investors and subsequently betting against those same obligations) so it's not too much of a stretch of the imagination to expect that there may be less than savoury reasons for this otherwise unremarkable Barclays memo having received so much media attention :rolleyes:

Keep calm and carry on people

Sticky_Fingers

topper75 wrote: »

Do we have to borrow at all?

Would we be Albania if we just ran the country on tax take?

Is the assumption that we have to borrow parallel with the household assumption that we need to go to the credit union to buy an LCD TV and 4x4?

I'm not easy with the debt mentality. Never have been with the exception of infrastructure for countries or mortgages for households.

Can't afford not to borrow at this moment in time since we need to borrow to pay for our public service and social welfare. Cut the PS, they go on the dole, they can't afford their overpriced mortgages and thats just more toxic debt being mixed up into whats left of the "economy", kiss goodbye to the banks and all services since we will be unable to pay for them. If the IMF/EU bail us out then expect very harsh times ahead, they don't care about public service only the repayment of the money we owe.
People don't realise how serous this is, if things actually go tits up as they look like they might then it could be very nasty for all of us. Higher taxes, crappier services and god knows what else.

I'm not saying this is what is going to happen but this is important matter that we should all be aware of because it could affect us all.

topper75

thebigbiffo wrote: »

what would all those overworked civil servants do if we could only run the country on our tax take?

He he - I didn't want to say that. But yeah!

Whilst I am being frank and drawing enemies - Paying people almost 200E not to work every week whilst we struggle to borrow money to keep the show afloat makes zero sense. Simple arithmetic. Look over and see what you get in the UK. I think it is the first thing any IMF person would look at. The IMF don't have to be elected or re-elected remember.

skyhighflyer

topper75 wrote: »

Do we have to borrow at all?

Would we be Albania if we just ran the country on tax take?

Is the assumption that we have to borrow parallel with the household assumption that we need to go to the credit union to buy an LCD TV and 4x4?

I'm not easy with the debt mentality. Never have been with the exception of infrastructure for countries or mortgages for households.

Yes, we need to borrow. Pretty much every developed company does. At the moment, we need €50 million a day more than we take in tax, so that has to come from somewhere.

curlzy

I don't understand banking stuff or bonds so all I got from this thread is that I should be very very very afraid, and now I am :eek::eek::eek: *curlzy goes and rocks back and forth in the corner*

Micky Dolenz

It's not about being afraid nor is it about scaremongering, It is about being informed about what is happening right now in our country.

topper75

skyhighflyer wrote: »

Yes, we need to borrow. Pretty much every developed company does. At the moment, we need €50 million a day more than we take in tax, so that has to come from somewhere.

It actually doesn't HAVE to come from somewhere. That is the crux of this issue. The markets may not be interested tomorrow.

The only hope at this stage is slashing the daily expenditure (it brings me no joy to say that).

Mrmoe

I think we need to print a few thousand of these posters. One of the greatest threats to our economic stability is hysteria.

http://en.wikipedia.org/wiki/Keep_Calm_and_Carry_On

TPD

Without knowing precisely what the danger is, would you say it's time for us to crack each other's heads open and feast on the goo inside?

Mr Benevolent

Tomorrow could well be one of the most important days in Irish history.

Sticky_Fingers

curlzy wrote: »

I don't understand banking stuff or bonds so all I got from this thread is that I should be very very very afraid, and now I am :eek::eek::eek: *curlzy goes and rocks back and forth in the corner*

tbh if the worst happens the sky wont fall in, the world will keep turning and the Sun shining, it'll just mean that life will be harder financially for many of us. Some won't even twig that something has happened. Looking at the silver lining in the whole situation it will mean that we can hope to draw a line under this sorry mess and put all our efforts into building up the real economy not pumping all our money into the gapping maw that is the Irish banking industry.

skyhighflyer

curlzy wrote: »

I don't understand banking stuff or bonds so all I got from this thread is that I should be very very very afraid, and now I am :eek::eek::eek: *curlzy goes and rocks back and forth in the corner*

You actually make a good point though. Poeple who are lucky enough not to know about these things envisage a kind of Mad Max / The Road scenario at the prospect of a default on Irish bonds. It doesn't happen like that.

Brazil, Russia and Argentina have defaulted on their bonds in the relatively recent past. The astute amongst you may note that Brazil and Russia form the 'BR' in BRICS, an investment banker acronym for tiger economies. Russia defaulted in 1998 (I think) and then grew solidly over much of the next decade, as did Brazil.

One good thing about the financial markets is that they forget as quick as they attack; and they don't have a sense of morality. If Ireland defaults, it won't become a pariah on the international markets for ever enternal: money will start flowing in again once investors can get a return, just like it always has done. New investors won't have some sort of moral grudge against Ireland for defaulting, if the yield is there in the future they'll take it regardless.

My name is URL

Our future seems to be in the hands of speculators.. not gonna end well

Sticky_Fingers

Mrmoe wrote: »

I think we need to print a few thousand of these posters. One of the greatest threats to our economic stability is hysteria.

http://en.wikipedia.org/wiki/Keep_Calm_and_Carry_On

True there is nothing we can do about it personally but that does not absolve us of our responsibility to try and understand what is going on. I didn't post this thread to scare the bejesus out of people but to let them know that important events that could affect them may happen shortly.

It is out of our hands now but if things do take a nasty turn it is our duty to know about it and understand exactly why. Also we should all remember it was FF who danced us down this path just so they could give their buddies from the Galway tent a dig out using our and our children's money.

skyhighflyer

The bond issue tomorrow should be fine. We're front-loaded for the entire year and can skip it if conditions get hysterical.

In fact, we can skip it for the next few months if need be. We have €10bn in cash from the 2008 surplus budget that we can use to take a break from the bond markets for a while.

Ireland is also in the happy position of only holding 15% of our debt domestically; there are a lot more than just us who are going to feel the pain if we default. The same Barclays note points out that Irish domestic banks own just €8.5bn of the debt, compared with balance sheets of about €700bn. A default on Irish debt won’t be borne by Irish banks, or by many Irish institutions at all.

My message to the institutional investors who buy our bonds is this: Irish government debt needs you, so step up or step off, fcukers.

Sticky_Fingers

skyhighflyer wrote: »

The bond issue tomorrow should be fine. We're front-loaded for the entire year and can skip it if conditions get hysterical.

We have financed 90% of our debt for this year (if I recall correctly) but when we finally do need to go to the bond markets it could get very hairy for us again. This cost of borrowing is unprecedented for the Irish state and we simply cannot afford it at these rates. The fact that they even reached these levels is not something that can be casually dismissed. The markets smell weakness and something has to be done to reassure them. They are heartless bastards but they call the tune and we need to find a dance they like so the rates will go down and we can afford to borrow again if we want to keep this freakshow on the road. What they want I have no idea but these vultures are circling so the lads in charge better think of something.

Ireland is also in the happy position of only holding 15% of our debt domestically; there are a lot more than just us who are going to feel the pain if we default. The same Barclays note points out that Irish domestic banks own just €8.5bn of the debt, compared with balance sheets of about €700bn. A default on Irish debt won’t be borne by Irish banks, or by many Irish institutions at all

I am not completely up with the financial markets but as far as I know (please correct me if I'm wrong) but isn't that an extremely bad thing since most of that debt is owed to European banks and this will lead to the worst case scenario of contagion were our problems infect the rest of the Eurozone if its not sorted.

Micky Dolenz

Mrmoe wrote: »

I think we need to print a few thousand of these posters. One of the greatest threats to our economic stability is hysteria.

http://en.wikipedia.org/wiki/Keep_Calm_and_Carry_On

That's brilliant, how can I shrink it for an avatar?

Rented Mule

Mrmoe wrote: »

I think we need to print a few thousand of these posters. One of the greatest threats to our economic stability is hysteria.

http://en.wikipedia.org/wiki/Keep_Calm_and_Carry_On

Brought to you by the people who brought us 'Peace in our Time'.

skyhighflyer

Sticky_Fingers wrote: »

We have financed 90% of our debt for this year (if I recall correctly) but when we finally do need to go to the bond markets it could get very hairy for us again. This cost of borrowing is unprecedented for the Irish state and we simply cannot afford it at these rates. The fact that they even reached these levels is not something that can be casually dismissed. The markets smell weakness and something has to be done to reassure them. They are heartless bastards but they call the tune and we need to find a dance they like so the rates will go down and we can afford to borrow again if we want to keep this freakshow on the road. What they want I have no idea but these vultures are circling so the lads in charge better think of something.

It's not unprecedented.

But if the prices tomorrow are anything much over the 5.5 percent likely to be charged by the Euro Stability Fund then I agree, the yield isn't sustainable. If we do have to go to that fund, it won't be until early next year. Tomorrow isn't determinative of anything.

As an alternative to the BarCap memo that caused half of Ireland to cack themselves this week (no doubt helped by the 'incisive' and totally non-alarmist financial reporting the Indo and Daily Mail are known for), I present an alternative view from Goldman Sachs:

The embattled Irish government will hit the market on Tuesday with an auction of four and eight year bonds. This might be some test follow the beating of its debt – in spite of ECB interventions – following the latest concerns about the size of the hole in its banking system. While on the road, I was shown two recent research reports on the banks from two competitors, one of which seems to have caused some of the concern; presumably because of its alarmist tone. I am not going to comment on competitors’ research apart from saying that I didn’t see any ground breaking news in either of the two reports, but – as so often before – if you blow hard enough at a simmering flame of concern, that’s what you get. Picking up on the theme, the Irish Independent claimed that the Irish government is close to calling in the EFSF and the IMF, something denied by the IMF.

thebaz

speculators deal in fear - create imagined Armageddon circumstances , stock up on essentials and hide in the bunker - i say **** em - the EU must back us , after all we are implementing the corrective painful economic measures and we were forced to vote for lisbon - so we will get support - the North Koreans havnt hit the nuclear reactor, just a few greedy speculators trying to make a few bob from the FT/Barclay worry about something that may happen - the US could invade China tomorrow ... but unlikely

skyhighflyer

Sticky_Fingers wrote: »

I am not completely up with the financial markets but as far as I know (please correct me if I'm wrong) but isn't that an extremely bad thing since most of that debt is owed to European banks and this will lead to the worst case scenario of contagion were our problems infect the rest of the Eurozone if its not sorted.

Ireland isn't the centre of the world like many of us think it is and isn't likely to bring down the Eurozone on its own. However, it's enough to galvanise the EU into giving us a dig out with cheap German money if we need it

MrMatisse

Confab wrote: »

Tomorrow could well be one of the most important days in Irish history.

What a load of bllox!

You dont hold a bond auction without getting indicative comments from your main buyers on whether or not they will be buying.

You dont just open the phones at half 8 tomorrow and see who shows up.

Bloody scaremongering already posted in politics.

We come to afterhours to get away from this **** , scaremongering by armchair experts.

MrMatisse

My name is URL wrote: »

Our future seems to be in the hands of speculators.. not gonna end well

Our future is in our hands. as it was when people were borrowing 300k for a gaf in a floodplain in westmeath, which of course was the banks fault.

Stupid bloody recklessness got us here by a huge portion of the Irish populace and we can get ourselves out but bloody moaning and worrying wont do it.

skyhighflyer

Really-Stressed wrote: »

What a load of bllox!

You dont hold a bond auction without getting indicative comments from your main buyers on whether or not they will be buying.

You dont just open the phones at half 8 tomorrow and see who shows up.

Bloody scaremongering already posted in politics.

We come to afterhours to get away from this **** , scaremongering by armchair experts.

Agreed. We did a €600m T-Bill auction last month (short dated govvie bonds) and it was oversubscribed by 10:1 for one of the issues. They haven't all just disappeared, and many institutional investors are smacking their lips over a juicy 5 or 6% coupon which is a nice return on what is effectively EU-guaranteed debt. The only question is whether we're willing to pay these lads that much for the privilege when there's an EU slush fund we can tap for cheaper, and they know that.