Why Bond Investors Like Ireland's Prospects

Europe is lurching into a fresh phase of its crisis, as Greece again warns it will miss its cost-cutting targets and Italy scares investors with its wavering commitment to austerity. Many euro zone banks are so weak they may soon need to be recapitalized.

Against this backdrop, the performance of Irish sovereign bonds is remarkable. The former Celtic Tiger was one of the first economies to hit the wall after the global financial crisis. Along with Greece and Portugal, it needed bailouts by the European Union and the International Monetary Fund to stay current on its debt payments. Yet Irish government bonds handed investors a 14 percent gain over the past three months, the highest returns among 26 major government debt markets, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.