Monday, February 13, 2012

Bloomberg yield goes below 7%

Apropos of nothing in particular the Irish government bond 9-year yield as calculated by Bloomberg finished the day at 6.93%.  This is the first time it has finished below 7% since the 1st of November 2010.

Bond Yields 6M to 13-02-12

Of course, actual yields on trades performed through the Irish Stock Exchange have been below 7% for more than a week.


  1. So the bond yield falls below 7%.
    The bond yield in 2014 is what matters.

  2. They don't matter now but they will matter before 2014. If there is no attempt to borrow independently before 2014 then there is little doubt that the country will remain almost wholly dependent on official funding. As this comes at interest rates of anywhere between 3.0% and 4.5% this is lower than current yields.

    However for the two- and three-year yields the gap is not so large. The two-year is around 4.4% and the three year at 4.9%. Borrowing at these rates is above the current EU rates but not a lot above those charged by the IMF. Of course, our current medium-term yields are hugely influenced by the fact that we are being supported by official funding. It is a bit of a counterfactual but it is hard to see how the yields would be as low in the absence of the EU/IMF funding.

    The nine-year yield at around 7% is a truer reflection of things but any initial forays into the market will be at maturities well below nine years, and probably in the three- to five-year range. Yesterday's move was just of numerical interest but there will be real implications if the NTMA "dips its toe" into bond markets later in the year.