STRONG DEMAND PREDICTED FOR TOMORROW'S BOND AUCTION - Five months ago the margin demanded by bond investors for Irish 10-year debt was 1.35 percentage points over German 10-year debt. This morning the margin is a nightmarish four points. fuelled by concerns over concerns of the size of the recapitalisation pit at Anglo Irish Bank. The markets, rightly or wrongly, are spooked. It is against that backdrop that the National Treasury Management Agency will seek to raise at least €1 billion of borrowings tomorrow. Paying more interest on the debt means more stress for the Irish tax payer.
Domenico Crapanzano, who is responsible for trading government debt at Jeffries & Co in London, says that Ireland has been in the news recently because of its banks and all of the coverage has been negative. He says that the bond market prices are exaggerated and that the markets are likely to to stabilise in the second half of the week. On tomorrow's bond auction, Mr Crapanzano says that the demand for Irish bonds is there but the prices will be expensive, adding that Irish bonds are currently five to six times more than German bonds. But he says the Irish Government may be facing a harder time raising funds for the rest of the year and into 2011. He points out that Ireland is issuing a lot more bonds than it used to and there is only a finite supply of buyers. He says it is a struggle to place all the paper offered in the market from all the countries trying to raise some funds.
The trader says that despite our problems, Ireland is not Greece. He says that markets can see we are serious about cutting our deficit and making tough austerity cuts. He adds that our problems are not stemming from Government spending, but our banking system.
He says that Ireland is actually ahead of its peers in the steps it has taken to get its banking industry back on track, citing the creation of NAMA and the bank recapitalisation moves. 'Markets are punishing Ireland more than it deserves,' he states. He adds that he would not be negative about tomorrow's bond auction.
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MORNING BRIEFS - While more people are set to pay tax after the budget there seems to be some interest in savings too. Permanent TSB says it Is taking in average deposit sums of €58,400 into a new type of savings account its launched that pays interest at the start of the 12 month fixed savings term rather than at the end. It expects to draw in around €1 billion of savings.
*** The Four Seasons Hotel in Ballsbridge is on the market. The hotel's backers are thought to be offering it at a significant discount to its replacement cost. The hotel was built for around €90m a decade ago. The hotel will be targeted at international investors who see it as a favourable investment after a cost reduction programme at the hotel and the opening of the Aviva Stadium and the National Convention Centre.
*** The Tokyo market is closed today. Gold remains near the record highs seen on Friday at around $1,280 an ounce because of uncertainty over the pace of US economic recovery.
*** On the currency markets, the euro is worth $1.3081 US cents and 83.45 pence sterling.
