Irish Government Bonds Slide as Allied Irish Says It Lost 17% of Deposits
Irish bonds fell, reversing earlier gains, after Allied Irish Banks Plc said customer deposits shrank 17 percent this year amid the debt crisis.
The decline pared the bonds’ first weekly gain in five as European Union, International Monetary Fund and European Central Bank officials spent a second day in Dublin before a possible bailout of the nation’s banks. Deposits dropped by about 13 billion euros ($17.8 billion) since the start of the year, Allied Irish said in a statement today.
“The risk of a bank run in Ireland is still at the back of people’s minds and reminds investors that a bailout needs to happen soon,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London.
Irish 10-year bond yields rose four basis points to 8.35 percent at 4:49 p.m. in London, after falling to 8.13 percent. The 5 percent security due October 2020 fell 0.22, or 2.2 euros per 1,000-euro face amount, to 78.02. German 10-year bond yields declined almost one basis point to 2.70 percent.
The difference in yield, or spread, between Irish and German bonds widened three basis points to 544 basis points, according to Bloomberg generic data. The spread is 19 basis points narrower this week, the first time it has tightened since the five days ended Oct. 15.
Irish Prime Minister Brian Cowen today said talks about potential aid are “going well.”
The government is engaged in talks for a “best possible” package, Cowen said in Dublin today. Irish central bank Governor Patrick Honohan said yesterday the nation may accept loans worth “tens of billions.”
Record Spreads
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, or 4.84 percentage points. the same day. The government has no plans to sell more bonds this year.
The euro, which rose as much as 0.7 percent against the dollar, traded little changed at $1.3652.
Spain needs to sell an additional 8.4 billion euros of bonds this year, according to estimates by London-based UniCredit SpA analyst Chiara Cremonesi. The yield on Spain’s 10- year security was little changed at 4.74 percent today, up from 4.55 percent at the end of last week.
Portuguese 10-year bonds yields climbed three basis points today to 6.96 percent. The spread over bunds, which widened today, narrowed 15 basis points this week, also the first contraction in more than a month. The Greek spread was little changed at 887 basis points this week.
Irish government bonds lost investors almost 12 percent this year, compared with a 9.1 percent decline on investments in Portuguese bonds, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German securities returned 6.8 percent, France gained 6.4 percent and U.S. Treasuries earned 7.3 percent in the period, the indexes showed. Greek bonds tumbled 19 percent.
To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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