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The price of Irish bonds for the year to date. On January 4, rates opened at 4.86%. This morning, they trade above 6.05%. Bloomberg.com
Live

Bonds hit all-time record as default fears continue

The interest rate on Irish government borrowings brushed a record 6.1%, amid fears the IMF may be called in.

AMID SPECULATION fuelled by Barclays Bank that Ireland may be forced to seek a bailout from the International Monetary Fund and the European Central Bank, the market price of Irish government debt has this morning surpassed its all time record, touching 6.1%.

Opening yesterday at 5.913%, the price demanded by investors rose steadily over the course of the day and closed at a daily high of 6.037%, and have continued to rise this morning as news of the Barclays report further provokes investor jitters.

The closing price was the highest closing price ever recorded by Irish 10-year bonds, but this morning’s early trading have surpassed the previous record of 6.069% hit over the course of trading on September 7, ten days ago.

By way of comparison, the market price of bonds – essentially the interest rate charged by investors when the government tries to borrow money from him – at the beginning of the year was a mere 4.86%.

The bond markets have fluctuated amid a period of relatively massive instability over the last six weeks or so, as investors baulk at the prospect of investing in Irish government paper.

Last week investors had offloaded bonds amid uncertainty as to the government’s final plans for dealing with Anglo Irish Bank. More recently, markets have been unsettled as investors wait for a final confirmation on how much the Anglo restructuring will cost – as well as the current speculation that the government may be forced to renegotiate the terms of some bond repayments, which many would see as a de facto default.

Though the rising costs do not impact the government for the time being, with the quoted prices being traded on secondary markets, the government will be anxious that rates may stay higher before the National Treasury Management Agency issues a fresh round of 10-year bonds next Tuesday.

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