US bond trader buys big into 'Irish turnaround'

The turnaround in the Irish economy will be “one of the best investments of the decade” and financiers who missed out on it are suffering “a fair amount of regret”, according to Michael Hasenstab, the US bond trader whose funds hold one in 10 of Ireland’s bonds.

California-based Mr Hasenstab (39) denied that his holding of Irish government bonds was “driving” the Irish bond market, which is worth about €85 billion.

He told The Irish Times: “We bought a lot of Irish securities at very distressed prices [which] means someone was selling those bonds.

“I think there’s a fair amount of regret by some people who sold those at distressed prices when they are now trading at par [face value] or above par. I think there is also some regret from people who missed what I would argue is one of the best investments of the decade: the Irish turnaround.”

Mr Hasenstab, who oversees $165 billion in investments for asset management company Franklin Templeton, began buying Irish government bonds in July 2011. In the same month, Ireland had been downgraded to “junk” status by credit rating agency Moody’s and bond yields were trading above 14 per cent.

Since then, as the company’s holding has risen to an estimated 10 per cent of the entire Irish sovereign bond market, yields have fallen to about 4 per cent. The accompanying rise in bond values leaves Franklin Templeton sitting on billions of euro of paper profit. Over the last 18 months, his funds have increased their purchase of Irish bonds in the secondary markets, while also participating in the NTMA’s primary issuance of Irish government bond earlier this year.

During this period, yields on Irish government bonds have fallen to about 4 per cent.

Mr Hasenstab says Ireland should get relief on its historical bank debt, and while any renegotiation would have no impact on his own funds’ position, Ireland “deserves” it.

“Ireland is benefiting from the fact that it took the tough medicine upfront but the terms that they got from official support probably could be revisited.”