Irish bond yields hit highs

IRISH bond yields hit record highs yesterday, ahead of today’s EU leaders summit in Brussels and amid fears that the new Government will fail to secure improved bailout terms.

The yield — or interest rate demanded by bond investors — on Irish Government debt soared above the 10% mark (for both two-year and 10-year bonds) with concern also growing that a permanent solution to the fiscal crisis currently dogging the eurozone will not be found in the two-day Brussels think-in.

The interest rate on two-year Irish bonds rose to 10.7%, before falling slightly to 10.6% (having climbed from just over 9% in the last week); while the yield on ten-year bonds was just below 10.1%. Yesterday marked the first time since before the introduction of the euro that yields on Irish bonds have been above 10%.

One analyst was quoted as saying that “a lot of uncertainty” still exists over Ireland and whether the Government can withstand pressure on the corporation tax question and manage to obtain an interest rate reduction on its EU loan.

However, Ireland wasn’t the only eurozone member to suffer in the bond markets yesterday, with Portugal also feeling the heat — the yield on its 10-year debt climbed 11 basis points to just over 7.6% with yields on its five-year bonds increasing to nearly 8.2%.

Greece, too, suffered with its 10-year bonds now linked to a 12.6% yield.

The Bloomberg news service quoted Charles Diebel of Lloyds Bank Corporate Markets, in London, as saying “there isn’t actually a solution to the problem. Yields remain at unsustainable levels, technically forcing insolvency.”