Irish bonds share Theresa May’s pain amid Brexit uncertainty

Republic’s debt underperforms all euro-area peers

Irish bonds are sharing the pain of UK prime minister Theresa May as her future and Brexit plan are thrown into doubt.

The Republic’s securities underperformed all their euro-area peers on Wednesday amid the political turmoil in our biggest trading partner. The correlation between Irish bond yields and pessimism in sterling, reflected through currency options, is getting stronger as Brexit fears grow, according to Mizuho International.

“The pain in Irish bonds is called Brexit,” said Antoine Bouvet, a rates strategist at Mizuho.

Irish five-year bond yields climbed 0.04 percentage points to 0 per cent as of mid-morning in London, taking their spread over German peers to 28 basis points, the highest level since May. That comes as the National Treasury Management Agency is due to announce its 2019 funding plans soon.


No confidence

Mrs May faces a no confidence vote Wednesday evening, with many of her Conservative Party MPs unhappy about the proposed solution to avoid a hard Border in Ireland. If Britain crashes out of the EU without a deal in March, it could almost halve the growth outlook for the Republic in 2019, according to the Economic and Social Research Institute. – Bloomberg