UPDATE: see below
In case you've missed it, Irish bonds spreads are on a renewed march upwards - needless to say, in anticipation of the mini-Budget maxi-soaking-of-the-middle-class by Brian^2+Mary. Hat tip to BL, the chart explains all:The same story told in price indices:Of course, our primary (and not-so-primary) dealers keep telling us that Government bonds are fine, things are going swimmingly indeed. In the mean time, another local maximum is breached, 10-year at 223.4 and 5-year at 217.9. Term premium widened again. Perhaps the prospect of an imminent roll-over of the last month issue at maturity (2012) coinciding with still gargantuan budget deficits is driving the 10-year spread away from the 5-year bonds?.. Wait until we issue the next tranche.
Update: From NTMA press-release on February Euro4bn bond issue: "The bond attracted strong demand from domestic investors who subscribed 55% of the total, as well as investors from euro area countries (20%), the UK (13%) and the Middle East (9%). As would be expected with a relatively short maturity bond, banks accounted for 72% of the amount invested. Pension funds contributed 11%, fund managers 10% and Central Banks 7%." Does this suggest that most of the bond was 'bought-in' by the publicly-supported Irish Banks and the Euro-area Central Banks? After all a whooping 79% of the bond placement went to Banks and Central Banks (BCBs), 75% went to 'investors' (inclusive of BCBs) tothe euro area countries, and only a meagre 21% went to private institutionals (although how does one treat funds run by the state-supported banks?). As I said before, February issue was a pipe-priming for the low-quality issues to come that will aim from the origination date for placement with the BCBs. A helicopter drop, indeed, but not of money - of public waste!
Now, per current spreads: term premium on 5-10year bonds yield spreads is now at +2.52% or in pricing terms +6.6%, implying that our 3-year bond, priced at an annual yield to maturity (YTM) of 4.01% is equivalent, roughly, to a 5.7-5.9% yield for a 10-year security.
Tuesday, March 10, 2009
Irish bonds - on the move again (updated)
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