The extra yield investors demand to hold Ireland's four-year notes rather than German securities may narrow as much as 50 basis points, Commerzbank AG said.
The yield difference, or spread, may decline to between 80 and 70 basis points in two months after the Government cut spending and created a so-called bad bank to purge lenders of soured assets, David Schnautz, an interest-rate strategist at Commerzbank in Frankfurt, said in an interview yesterday. The spread was 113 basis points as of 8.46am today.
"Ireland is our favorite pick among the peripherals because they have already implemented their austerity measures and don't need to rely on any political decisions in the European Union," Mr Schnautz said. Reforms "are moving rather smoothly and in the right direction. This should give investors comfort with the spreads still rather attractive," he said.
The National Trasury management Agency (NTMA) sold €600 million of the four-year notes on February 16th. Irish bonds of all maturities have made investors 1.8 per cent this year, compared with losses of 2.3 per cent for Greek debt, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
Irish 10-year bonds yielded 154 basis points more than similar-maturity bunds today, down from 283 basis points on March 19th, 2009, which was the most since before the euro's debut in 1999. The equivalent Greek spread with Germany widened to 396 basis points last month and was at 229 basis points today.
Bloomberg