Bad mortgage concerns erode bank confidence

As Ireland edges back into bond markets, the banks that tipped the country into bankruptcy remain reliant on aid while bad mortgages mount.

The yield on Ireland’s benchmark 2020 bond this week fell below 6% for the first time since the 2010 bailout. Bank of Ireland Plc’s State-guaranteed bond, maturing in 2015, yielded about 260 basis points more than the equivalent Government security because of concern over unpaid home loans.

“The mortgage issue erodes confidence in the banks,” said Stephen Lyons, an analyst at Davy, Ireland’s biggest securities firm. “It erodes their own confidence to lend and erodes the confidence of investors to lend to Irish banks.”