Irish Bonds and the ECB - Bond Sales Watch - the Risk of Sovereign Default

[PaddyJoe]

Yeah that Irish Govt bond- 10 year have been increasing steadily since June.

Any reasons?? Can you remember any event that spooked the market since 6th of August??

Graph:http://www.bloomberg.com/apps/quote?...10YR:IND#chart

I guess what has spooked the market over the last few days has been the losses by AIB(and the fact that they can't raise extra capital without an extension of the guarantee); the extra capital injection for Anglo approved by the EU and the growing realisation by international investors that the sums just don't add up. And the fact that BOI anounced losses this week as well.
As already mentioned on another thread here Brian Lucey said that Bank of Ireland are 'the best looking horse in the glue factory'

[TotalMayhem]

actually, AIB posted their losses before the 6th of August. since then we heard Richie Boucher's tales of BOI's bright future and granted another billion and a half top up for Anglo.

[C. Flower]

Orderly default, man the pumps, and organise to feed everyone and keep a roof over their heads.

Under the present governmental regime, if it continues, there will be a lot more deaths than the suicides and untreated patients who've been sacrificed on the altars of capital so far and there won't be room on the outward-going boats for the numbers trying to leave.

[MediaBite]

The Jeannie Johnson may well have to be pressed back into service. Moored somewhat ironically outside NAMA's office in Dublin - is that right?

[DCon]

I wonder if this 2.5BN is factored in to our borrowing requirement yet.

As well as making the system “fairer and more equitable”, the reforms are also aimed at addressing a shortfall in the social insurance fund, which is used to pay for PRSI and other welfare benefits. The surplus in the fund is due to run out this year. As a result, it will require exchequer funding of about €2.5 billion this year.

http://www.irishtimes.com/newspaper/...breaking6.html]

[C. Flower]

I think this 2.5BN will have to found somewhere inside the Dept of Sicial protection budget in the form of savings or gains retrieved from fraud prevention controls.

PRSI is being extended to low paid people and onto "unearned income".

[DCon]

PRSI is being extended to low paid people and onto "unearned income".

Will politicians unvouched expenses be classified as "unearned income" I wonder?

It should be. Expenses paid for vouched costs should not be, but no vouching should result in tax.

I would love to see P B Ahern justify his 10,000 in "travel exenses". When he can't, his 10,000 should be taxed.

[C. Flower]

Back onto the topic of Bond sales.....Gurdgiev seems to be saying that we're covered to the end of the year, although the cost of borrowing and of insuring our debt has gone right up. Is that right ?

[DCon]

Back onto the topic of Bond sales.....Gurdgiev seems to be saying that we're covered to the end of the year, although the cost of borrowing and of insuring our debt has gone right up. Is that right ?

Allegedly

The NTMA raised €15.0 billion in long-term bond funding in the six months to end June 2010
and, as a result, begins the second half of the year in a very strong funding position. When
strong sales of the retail State SavingsTM products are factored in, more than 80% of the planned
€20 billion borrowing in 2010 has already been raised. Taking the maturity profile of the
NTMA’s short-term borrowing into account, the Exchequer is fully funded through the first
quarter of 2011.

http://www.ntma.ie/Publications/2010...ewJuly2010.pdf

[C. Flower]

Allegedly

http://www.ntma.ie/Publications/2010...ewJuly2010.pdf

Surely you don't doubt that ?

Do we know how much of that was bought by the ECB ?

[C. Flower]

More info on Bonds. Govt is fully funded until Q2 in 2011.

Link:http://www.businessandfinance.ie/cat...sp?itemID=2341

http://www.ntma.ie/Publications/2010...ondAuction.pdf

What does that mean? Fully funded to cover the fiscal deficit? Or fully funded to cover maturing bonds, bank bailouts and the fiscal deficit?

[C. Flower]

Today's Independent quotes the Deutsche Bank Report we discussed last week - which said that Ireland would need "a fair wind for many years" to survive its indebtedness.
It also says it has possession of a more recent and even more negative Deutsche Bank report -
http://www.independent.ie/national-n...d-2297951.html

A second, harder-hitting memo to staff, obtained by this newspaper, reveals that there has been a marked deterioration in sentiment toward Ireland.
It said our position was destabilising because of a summer news flow that had become "incrementally worse".
"In terms of the fiscal deficit, there is no sense that Ireland is pushing for more [than the €3bn], and with Spain and Portugal having delivered supplementary consolidations this summer, Ireland's consolidation plan might look behind the curve.
"The fiscal deficit is only stabilising and within the details income tax is an element of weakness. Nama, the bad bank, is generating a negative news flow too."
On the positive side, DB pointed out that, from a sovereign financing perspective, Ireland has been pre-funding, and that by mid-2010 it had already funded 80 per cent of its 2010 requirement.

Brian Lenihan's assurances that his approach has the support of "the markets" are looking ragged at this stage. NAMA is seen as a chain around our necks.

The response of "the markets" is of course to demand more cuts - but Deutsche Bank also criticised the Irish Government's reluctance to use Income Tax to raise funds.

[C. Flower]

The financial press is in hyper mode over Irish Sovereign default risk.
The cost of CDS has shot up again to the highest since March 2009. Honohan has issued a statement saying that the Anglo bailout is doable, clearly trying to soothe the market before the imminent bond sale.

When will he tell the truth and say that what the Government is trying to do is Effing mad ?

http://online.wsj.com/article/BT-CO-...16-705176.html

Updates prices, adds background, comment.)
LONDON (Dow Jones)--The cost of insuring Irish sovereign debt against default using credit default swaps hit 300 basis points Monday, its highest level since March 2009, amid concern over the recapitalization of the Irish banking system.
Ireland's central bank governor, Patrick Honohan, said Monday he expects total spending of EUR22 billion-EUR25 billion to be necessary to fix the now-nationalized Anglo Irish Bank Corp., which suffered huge losses when the nation's property market crashed in early 2009.

Ireland's banks were hard-hit by the property-market crash. They had made big loans to property developers, many of which ...

[C. Flower]

The financial press is in hyper mode over Irish Sovereign default risk.
The cost of CDS has shot up again to the highest since March 2009. Honohan has issued a statement saying that the Anglo bailout is doable, clearly trying to soothe the market before the imminent bond sale.

When will he tell the truth and say that what the Government is trying to do is Effing mad ?

http://online.wsj.com/article/BT-CO-...16-705176.html

Xray's Anglo Shock thread also looks at what is happening to the cost of Irish Sovereign borrowing.

Another bond sale to watch this morning. Honohan's attempts to talk the market up over the weekend were worthy but transparent.

Brian Lucey posted a link to an very clear and he says "scary" analysis by Investor Guy on the real risks to the European banking system, with a special focus on the possibility of Sovereign default.

http://www.calculatedriskblog.com/20...ean-banks.html

Investor Guy refers the rejection of IMF terms by Hungary that we have discussed here last week and shows how the Stress Tests were unrealistic and ignored the far from remote possibility of sovereign default by at least one European state.

A highly recommended article!

[C. Flower]

To go with that - "When Irish bonds are Spreading"...

Chart from FT/Alphaville -

http://ftalphaville.ft.com/blog/2010...-are-widening/