SF: Irish Bonds Rise as ECB Says Nation May Use Aid to Help Banks
Nov. 15 (Bloomberg) -- Irish 10-year bonds rose, driving the extra yield investors demand to hold the debt instead of German bunds to the lowest in a week, on signs the government is getting closer to accepting aid to resolve its fiscal crisis. Irish 10-Year Bond Spread Near One-Week Low Amid European Talks
The advance narrowed the yield spread with benchmark bunds to the least in a week. The government in Dublin said it's in talks with European officials about "market conditions." European Central Bank council member Miguel Angel Fernandez Ordonez said the country needs to make a "final decision" on its fiscal crisis to calm markets, and ECB Vice President Vitor Constancio said Ireland could use the European Financial Stability Facility to help prop up its banking system to restore investor confidence.
"The Irish are trying to give the impression they can get through this by themselves, which seems increasingly unlikely," said Nick Stamenkovic, a fixed-income strategist in Edinburgh at RIA Capital Markets Ltd., a broker for money managers. "The markets are wary that they could change tack, so don't want to short their bonds at this juncture."
The yield on the Irish 10-year bond fell 12 basis points to 8.24 percent as of 12:18 p.m. in London, the lowest since Nov. 9. The 5 percent security due October 2020 rose 0.690, or 6.90 euros per 1,000-euro ($1,364) face amount, to 78.615. The yield difference, or spread, over bunds narrowed 17 basis points to 546 basis points, or 5.46 percentage points, according to Bloomberg generic data.
German bund yields rose five basis points to 2.57 percent, the most since Oct. 28, while the yield on the U.S. 10-year Treasury climbed seven basis points, to 2.86 percent, following a 16 basis-points advance at the end of last week.
The Europe Stoxx 600 Index of shares gained 0.4 percent, while the Irish Overall Index added 0.5 percent.
'No Support'
"Ongoing contacts continue at official level with international colleagues in light of current market conditions," an Irish Finance Ministry spokesman said in an e- mail yesterday. "Ireland has made no application for external support."
In a conference call of ECB officials on Nov. 12, Ireland was pressed to seek outside help within days, a person said on condition of anonymity. Ireland is "fully funded till well into 2011," the Irish Finance Ministry spokesman said yesterday.
The euro fell 0.4 percent to $1.3641, near the lowest level since Sept. 30, and was 0.1 percent stronger at 113.18 yen.
The Greek-German yield spread was 2 basis points lower at 886 basis points after Eurostat said Greece had the euro region's largest budget deficit and public debt last year. Its 2009 budget shortfall was revised to 15.4 percent of gross domestic product from 13.6 percent, surpassing Ireland's 14.4 percent shortfall.
Trade Surplus
While Ireland is fully funded until the middle of next year, the yield on Irish 10-year bonds soared to a record 652 basis points above bunds on Nov. 11. Portugal's yield spread over Germany climbed to a record 484 basis points on the same day. It has completed this year's bond sales.
Greece received a 110 billion-euro three-year bailout from the International Monetary Fund and the European Union in April. The 750 billion-euro stability facility was created the following month to provide umbrella protection to other euro region countries, initially causing yield spreads to plunge.
Irish bonds led spreads wider over the last month on concern that the cost of supporting Ireland's banks will overwhelm government finances. Portuguese yields climbed as political wrangling keeps the nation from agreeing to measures that will reduce its budget deficit.
Germany is pressing Ireland to seek aid before a meeting of European finance ministers tomorrow to calm market volatility and win agreement on making investors help pay for future bailouts, a German government official said yesterday.
