Irish bond yields rise as work on second Greek bailout begins

IRISH bond yields rose for the first time in more than a week yesterday, as the European Union began work on a second bailout agreement for Greece and despite the Government calming fears over the need for similar measures here.

Finance Minister Michael Noonan rejected talk that Ireland might need a second EU/IMF bailout package next year, adding that the country may return to the bond markets in 2012 instead.

Mr Noonan’s remarks followed comments made by Transport Minister Leo Varadkar over the weekend that Ireland may require further loan payments next year and would be unlikely to return to the bond markets before 2013 at the earliest.

Mr Noonan said Ireland is on course to meet its quarterly commitments to the EU/IMF rescue programme and will grow out of its present difficulties.

Depending on advice from the National Treasury Management Agency (NTMA), Mr Noonan said Ireland could return to the bond markets next year, in a tentative manner.

However, Taoiseach Enda Kenny said it has never been the Government’s intention to go back to the markets on a full-scale basis before the bailout programme runs its course, at the end of 2013.

Mr Kenny also backed up Mr Noonan’s statement that a second loan application would not be necessary for Ireland.

That view was also echoed by Central Bank governor Patrick Honohan, who said that bond market conditions will also improve over time.

However, the yield (the interest rate demanded by bond investors) on 10-year Irish bonds comfortably topped 11% yesterday; partially on the back of Mr Varadkar’s weekend comments.

It was the first movement in the rate for long-term Irish bonds for eight days. Two-year bond yields were up by 0.08% at 12.34% — the largest movement for a fortnight.

Long- and short-term borrowing costs for most debt-laden eurozone countries were up yesterday, on the back of the worsening debt crisis in Greece.

Greece has failed to meet any of its deficit reduction commitments since taking a €110 billion EU/IMF bailout package last year.

Its government started emergency talks with the EU at the weekend, after concerns grew over its funding for the next two years, with the IMF stating that it would withhold the next tranche of aid (due at the end of June) unless Brussels guarantees to meet the country’s funding requirements for 2012.

Yesterday’s developments didn’t bother the stock markets too much, however.

Frankfurt and Paris were down marginally, by 0.1% and 0.2% respectively, while the US exchanges and London’s FTSE were closed due to public holidays.

In Dublin, meanwhile, the ISEQ dropped by 0.4% amidst subdued trading.

The only real movement of note was a 25c rise (to €16.45) for ICG, a 29c increase (to €21.10) for DCC and a 20c fall to €14.85 for CRH.