Irish bond yields rise for 12th day


Bond yields closed over 8.6 per cent this afternoon, despite reassurances from Minister for Finance Brian Lenihan in recent days that Ireland would not need to access a bailout fund.

The yield on the Irish 10-year Government bond was 8.625 per cent compared with yesterday's close of 7.939 per cent.

Bonds in Ireland, Portugal and Greece have plunged since European Union leaders agreed on October 29th to consider German Chancellor Angela Merkel's proposal for a permanent rescue mechanism as of 2013 that would involve debt restructuring with losses for private holders of sovereign bonds.

Clearing house LCH Clearnet has said it will increase margin requirements for customers trading Irish government bonds. The additional margin requirement of 15 per cent will be charged on investors' net exposure from November 11th, and the change will be reflected in a margin call on November 12th, LCH said in a statement on its website.

The difference in yield, or spread, between 10-year Irish bonds and similar-maturity German bunds widened to a record 617.5 basis points.

Speaking on BBC's Newsnight yesterday, Mr Lenihan said the country "absolutely" wouldn't need a bailout and reiterated that Ireland would honor its debts.

His comments came following a visit by EU economic commissioner Olli Rehn, during which he backed the Government’s four-year budgetary strategy. Mr Rehn, who met with political, business and union leaders during his visit, called for cross-party consensus to support of it.

"Lack of political consensus on the four-year fiscal consolidation plan is only likely to add to upward pressure on Irish government bond yields in the short-term," Bloxham analysts wrote in a note today.

German 10-year bunds declined for a second day as investors prepared to absorb the latest round of government-debt supply amid growing concern that some euro- region peripheral nations will fail to cut

budget deficits.

Portugal sold €556 million of bonds due in 2016 and €686 million of bonds due in 2020. The securities due October 2016 were issued at an average yield of 6.156 per cent, the country's debt management agency said. That compares with an average yield of 4.371 per cent at a previous auction of the same-maturity debt on August 25th.

The auction attracted bids for 2.3 times the amount offered, compared with a bid-to-cover ratio of 2.1 in August. The bonds due June 2020 were issued at an average yield of 6.806 per cent.

That compares with an average yield of 6.242 per cent at the last auction of the same-maturity debt on September 22nd.

Today's auction attracted bids for 2.1 times the amount offered, compared with a bid-to-cover ratio of 4.9 in September. The total sold was close the maximum amount that the IGCP, as the debt agency is known, said it would sell.

Additional reporting: Bloomberg