Another good auction result for Ireland today: Just sold EU500mln in 3-month t-bills with a yield of .55% and the bid to cover ratio (demand) was strong at 4 times covered. Yield has fallen by 15bps from previous issuance. Good news and paves the way even further for a full return to bond markets scheduled for early next year. Also the Producers price index (PPI) showed a strong gain from previous months reading of -2.3% to show a gain of .3% Great work.
Below is a chart on the Irish 10 yr govt bond and the ten year history of its yield, obviously it got out of hand when bailout was requested but has over the last year dropped significantly from the peak and is currently around the 5% mark. At the lows it was circa 3% which was still “celtic tiger” times so would not be expecting this to plummet from current 5% region but would be optimistic that the first 10 yr issuance could be somewhere between 4-5% as a tester and then hopefully it can gain some momentum to the downside. Like I say would not be expecting miracles here and the yields still have to reflect a risk premium – (common practise is to benchmark vs German govt bonds i.e x amount of basis points above the current German govt 10 yr) but I would hope to be targeting the lower end of that 4-5% range in an optimistic environment.
I really think Ireland are close to a turning point and if there is even a glimmer of global GDP pick up then we are well positioned to capitalise on it. We have done our best during the downturn to de-leverage where others may have not and feel that our “reward” should come in the form of a relaxation of terms of bailout money. Unfortunately we are at the back of a long list of problems for the EU & IMF so patience is probably a virtue here.