Irish Bailout Fails to Satisfy Markets

Irish bailout, still not known how much is planned, failed to alley market worries as debt costs for Ireland, Spain and Portugal continued at high levels. However, most of the European share indices along with that of the US were up, with positive news from the US data.

Jobless claims in the US came down slightly comparing with the previous week. Yesterday, the US revised up its third quarter growth rate from 2% to 2.5%.

Bond Yields

The yield on Irish government’s 10 year bond was 8.92%, a record level reached before the bailout talks began. Though Irish government is not going for debt sale as it is fully funded up to the first half of next year with EDB funding, it is still a matter to worry. Because, it denotes that the markets are losing confidence on Ireland’s capacity of repayment of its debt.

The yield on 10 year Portuguese bond was 7.8%, which means the bond spread relative to the German bund was 4.8%. The Spanish-German 10 year bond spread recorded at 2.6% a life time high for Spain.

It seems Irish political turmoil has little effect on markets. Some of the ruling party’s MPs are demanding the resignation of the Irish Prime Minister, while its junior partner Green party is demanding earlier election in January 2011.

Spain accounts for 10 percent of the Eurozone economy while Ireland and Portugal account for 2% each.



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