Citigroup warning over bond rally

As Irish bonds extend their rally, the gains for investors may be disguising a different story.

The yield on Ireland’s benchmark 2020 bond fell below 5% yesterday for the first time since the bailout in Nov 2010. The debt is the second-best performing in the euro area this year, trailing only Portugal.

All of the optimism that Ireland can raise money in the markets and avoid a debt restructuring is premature as the nation struggles to emerge from its worst recession in modern history, said Michael Saunders, Citigroup’s head of European economics in London.