Thursday, August 25, 2011

Yields near 9%

Although it is an artificially created measure and the actual values it takes have no psychological meaning the 10-year Irish government yield calculated by Bloomberg is hovering just above 9%.  As I write this it is 9.057%.

Bond Yields 1D 25-08-11

This is still well above the level the would allow new Irish government bonds to be issued to the market.  We have access to EU/IMF funds at around 4.5% so the yield is still twice that.

However, the yield is close to the coupon we are paying on some of our debt.  There is a €9.1 billion tranche of Promissory Notes to Anglo and INBS that has an annual coupon of 8.6% as outlined here.

While the drop in the 10-year yield from over 14% a month ago to 9% now has been quick, the drop in the two-year yield has been almost alarming.

Bond Yields 6M to 25-08-2011

On the 18th July the 2-year yield was over 23%.  This morning it it is 8.7%.  The Irish government bond with a 4.0% coupon that is due to mature on the 14th January 2014 could be bought for around €68 for each €100 unit when the yields reached their peak. 

In just a little over five weeks the price of this bond has risen to near €90.  There probably isn’t too many who were able to buy when the yields spiked towards the end of July, but those that did are sitting on a very tidy profit.

The Irish 2-year yields is 8.7%. What is Greece’s?


  1. There was an article about this very subject in the Times today. A leading fund manager thinks that of the countries subject to the EU/IMF programme Ireland is the best-placed to grow itself out of trouble and to pay back the loans owed to the EU and IMF. Falls in our bond-yields in both the short and medium-term suggest that the market agrees with him. Looking at the vertiginous drop in two-year yields could give us the option to borrow short-term financing from the markets in the New Year.

  2. Lorcan Roche Kelly seemed to think that the interest rate on the Promissory note doesn't matter because we will get it all back anyway because we own Anglo. Which I found bizzare, I though we would never again see that money again?