The issue of Irish bond prices entered mainstream discourse rather rapidly in the last three months. You may have noticed however that different media organisations seem to quote different prices, so I thought it would be useful to explain how the prices you read in The Irish Times are produced.

We quote the generic 10 year bond price data supplied by Bloomberg. The code for this debt security is “GIGB10YR” and you can access Bloomberg’s summary page for it here.

The reason there is not definitive prices for bonds is that they do not trade on a centralised exchange like the stock of quoted companies. Dealers create an over the counter market where they match up buyers and sellers. Rather than charge comission they make their money from the difference between the “bid” price which is what they pay to buy a bond and the “offer” price which is what they sell it at to another investor.

The yields (effectively the interest rate that investors demand to hold Irish debt) quoted by Bloomberg are an average of the bid side of the market based on a basket of generic government bonds.

If you want to learn more about the bond markets and how they work Investopedia’s Bond Basics article is a good place to start.