ONE OF Europe’s biggest clearing houses has warned investors that they may be forced to stump up substantially more money to trade in Irish debt.
LCH.Clearnet told members they might be required to deposit more cash to trade in Irish sovereign bonds, a move that is being widely interpreted as a signal that the organisation will act next week.
Such a curb would be a blow to the Irish debt market and comes amid growing concerns over the fragility of the euro zone’s peripheral economies. Irish bond yields breached 7.8 per cent yesterday.
Ireland and Spain have been removed from a list of countries in which Russia’s $130.9 billion sovereign wealth funds is permitted to invest, according to the Russian finance ministry’s website. Norway’s $520 billion fund said the past few weeks had seen Spanish debt grow a lot less attractive.
“The warnings by sovereign wealth funds creates even more uncertainty in the euro zone,” said Nigel Rendell, senior strategist at RBC Capital Markets.
LCH.Clearnet has contacted members in the past few days to say that, under newly introduced rules, it has the power to impose a 15 per cent “haircut”, a cash deposit to help indemnify against default risk, against Irish bonds if it determines that the risk of the Irish Government defaulting has increased. – (Copyright The Financial Times Limited 2010)
