We sold €500 million of 4 year debt due in 2014 at an average yield of 4.767%, compared with 3.627 percent at the previous auction on August 17. Cover on 4 year paper was We also sold €1 billion wort of 8 year paper due in 2018 a yield of 6.023%, up from 5.088% in a June sale.
Short term stuff first:
Cover support is clearly running well above average/trend, indicating potential engagement by the ECB. Price spread is down, suggesting that the yields achieved are reflective in the perceptions compression on behalf of bidders, which in turn might mean that the markets are getting more comfortable with higher risk pricing of Irish bonds.Next up: yields and prices achieved:
The dynamics are crystal clear - we are heading for a new territory in terms of elevated yields and lower prices. Actually, setting historical record in both, despite likely ECB interventions.Weighted average accepted price:
Boom! The curve is getting curvier.On to longer term stuff:
Yield spread down as well - same reason - higher yields are now a 'normal' for the markets as average accepted yield shot up.
Cover slightly up, perhaps being pushed by the bidders flowing from the shorter term paper - crowded out by Jean Claude Trichet's boys. Price spread is down (see yield spread discussion above).Predictably, longer-term accepted average price is testing historical lows:
Boom, redux!And the maturity profile of debt is getting steeper for the folks who'll take over the Government in the next round, and our teenagers (that'll teach'em a lesson, for those, of course who'll stay on these shores):
thanks for your analysis!! it would be impossible to get any useful information from the "papers".
ReplyDeleteGreat post, Constantin. I'm thinking that such POLITICAL decisions can only be made on an expectation of future heavy inflation (by a sane person)... A good bit more of incipient inflation build up and then, 'going forward', what's going to be the propaganda put out to effect that sudden transition to spend, spend spend, before your money's worth nothing and prices soar... And after that... will they rein it in??? Or, will the substantive indebted public and 'insider' favoured like such a state of affairs so much that to do so would be elective suicide? Watch this space...
ReplyDeleteWhen Oh When Oh When are these Neanderthals going to accept your analyses Dr Gurdgiev?
ReplyDeleteThe markets don't believe the hype, Michael O'Sullivan is the latest in a long line of economists starting with David McWilliams, to publicly ridicule this dross and still onwards they march into the valley of death.
Absolutely Faustian.
Dan O brian said this in todays Irish Times:A more insidious longer-term pattern seems to be emerging. As the over-subscription of the bond auctions yesterday shows, investors continue to queue up in numbers to buy risky bonds in the primary market.
ReplyDeleteBut within days, they start selling them off at a loss in the secondary market, driving the yield ever higher. What on earth is going on? Irish Banks buying up the bonds to give illusion of successfull placing then having to sell at discount a few days later to get money back ! Sound like an "Anglo" style support operation to me !
This little PIIGSy went to market,
ReplyDeletethis little PIGGSy went default.
This little PIIGSy had a bailout,
this little PIGGSy had none.
And this little PIIGSy went "wee wee wee" all the way to Bonn.