Tuesday, October 11, 2011

Bond Yields rise – rapidly

The 10-year yield on Irish government bonds as calculated by Bloomberg went back over 8% today.  It is pretty clear that there was some change about half-way through the trading day that saw the yields jump to 8.4%.  Yields fell back slightly later in the day and ended at 8.2%.

Bond Yields 1D 11-10-11

What caused the jump?  Hard to know.  There was no news or additional information on the Irish economy released today.  Yields of other PIIGS didn’t show the same jump.

When the drop under 8% occurred a fortnight ago we felt it might be temporary and that seems to how it has turned out.  There was no good news that could have been used to explain the drop from 8.2% to 7.9% on the 28th of September and likewise there is no bad news to explain today’s rise from 7.8% back to 8.2%.

Trading on Irish government bonds is relatively thin but we do know that the covered banks have been purchasers in recent months. The latest Money, Credit and Banking Statistics (Table 4.2) show that their holding of Irish government increased from €9.6 billion in July to €11.3 billion in August.  The covered banks now hold one-eighth of the total stock of Irish government bonds.

No comments:

Post a Comment

Bond Yields rise – rapidly @ Unsecured Loans Proudly Powered by Blogger