Just a day after we said ‘bond yields hold steady’ this happens:
The Irish ten-year yield as calculated by Bloomberg has fallen below 8.3% – this the is lowest it has been for all of 2011. After a month of oscillating between 8.5% and 8.8% the drop to 8.2% is to be welcomed. Whether it will be maintained is another thing and even at 8.2% they will still have to drop by around half until we can sustainably borrow from these markets. Still, it is another step in the right direction.
The yields in the NTMA’s Daily Report of Outstanding Bonds shows that the actual yields on the bonds are even lower, with most below 8%. Click to enlarge.
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Eh, yields to maturity are of shorter duration than the notional 10 year yield, no?
ReplyDeleteWe have no bonds due to mature in September 2021 so the Bloomberg calculation is on a longer duration alright. Depending on the shape of the yield curve, yields can be higher or lower at different durations. There have been plenty of times recently when the 2013/14 maturing bonds had higher yields than those to 2018/20.
ReplyDeleteThere probably isn't a whole pile to the difference between the Bloomberg notional yield and the ISE reported yield. Whatever way we look at they fell!
Oops, how badly phrased was that?
ReplyDeleteWhat I mean is that I always understood the Bloomberg to be a notional 10 year yield, whereas the outstanding bonds have shorter durations, hence the lower yield to maturity.
If the NTMA issued a new 10 year issue, they'd get the Bloomberg price (roughly speaking), if they reopened one of the existing ones, they'd get the YTM, but it wouldn't have ten year's duration.
Drat, you understood it anyway! So much for struggling with captchas!
ReplyDeleteBloomberg is reporting 1 year bond as increasing to 9.88 today, should we be worried or does it really matter if we can raise funds on a longer maturity bond?
ReplyDeleteIt's probably not anything to be hugely worried about. We don't have any 1-year bonds in issue or bonds maturing in 12 months. The calculation by Bloomberg is probably based on the Nov 2011 (2 months), Mar 2012 (6 months) and Apr 2013 (17 months) bonds. None of these have shown a noticeable price increase in the last month.
ReplyDeleteWhen we do "dip our toes back into the market" it will likely we with some duration Treasury Notes (3, 6 or 12 months). The 1-year yield is instructive in this regard (and is still way to high!) but it will be a year, at least, before this happens so any further reduction in the uncertainty surrounding the government debt position may improve things.
Of course, there may be moves in the opposite direction (NAMA, ELA etc.). That's why our yields are where they are, but until we are in a position to move back into these markets the yields are just a useful indicator to track.