IRELAND MANAGED to break an eight-day losing streak on international bond markets yesterday, with the cost of Government borrowing declining slightly, but Irish banks were hammered by stock market investors.
Sovereign bond yields – the interest rate investors demand for holding Irish debt – remained near record highs for much of the day but finished a little lower at 7.623 per cent.
This follows the publication on Thursday of the Government’s plans to cut €6 billion from next year’s budget.
European Central Bank president Jean-Claude Trichet said he was optimistic the budget plan would calm investors.
However, the spread – the premium investors demand to hold Irish debt instead of the benchmark German bunds – on 10-year money reached 5.34 per cent yesterday, the most since Bloomberg began collecting the data in 1991, before narrowing to 5.2 per cent.
Ireland also led a surge in the cost of insuring sovereign debt to a record as the Government struggles to convince investors it could avert a European Union-led bailout.
Credit-default swaps on Ireland rose for a ninth day, soaring 18 basis points to 587, according to data provider CMA.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
An increase signals deterioration in perceptions of credit quality.
Sovereign concerns surrounding peripheral European countries including Ireland weighed on European banks.
But Irish banks were by far the worst performers, falling between 11 and 20 per cent.
“Irish financials definitely seem to be suffering under the weight of sovereign concerns,” a Dublin-based broker said.
– (Additional reporting: Bloomberg)
