Thursday, July 7, 2011

Bond Yields go vertical

Yesterday was a staggering day for eurozone government bond yields.  The trigger was Moody’s downgrade of Portuguese government bonds by four notches.  The most dramatic response for Irish bonds was in the two-year yields constructed by Bloomberg

[Note: Ireland do not have any two-year bonds issued.  The yield is calculated using the market prices of bonds which are due to mature in around two years.  The full list of Irish bonds can be seen here.]

Here is the two-yield on Irish bonds for the past three months from Bloomberg.

Bond Yields 3M to 06-07-11

It went vertical yesterday!  This was the largest recorded basis point jump in Irish bond yields.  The two year yield  jumped more that 220 basis points, from just below 13% to just over 15%. 

The yield on the “D-day bonds” due to mature on the 15th January 2014 on which the Bloomberg two-year yield calculation is largely based surged to 15.20%.  The EU/IMF rescue package was designed to allow a return to raising money from these markets 12 months from now.  The longer the rescue package goes on the further from that we seem to be getting.

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