The cost of borrowing for the Irish state has tripled since April. The Irish 10-year bond has risen from an all-time record low of 0.6% in April to 1.8% last week, as markets price in increased risk that Greece will leave the euro zone.
Peter Brown, from the Institute of Investing and Financial Trading, says the bond market is the method by which European Central Bank chief Mario Draghi pores his €60 billion worth of quantitative easing into the market every month. When QE was first announced, the markets got very excited and bought bonds at really unrealistic levels - German ten year bonds went to 0% while Irish ten year bonds fell to 0.6%. As the first couple of months of QE passed and we saw a slight improvement in the euro zone economy, people realised that those bond levels were unsustainable and then a correction came, Mr Brown explains. He says today's bond levels are correct and sustainable and now predicts that the markets will be very calm and passive for the next six months.
The investor says the hugely important issue for Ireland now is the fact that we have a €220 billion "interest only mortgage". The country owes €220 billion and we don't make repayments on the principal but just service the interest. The interest rate the country pays on that debt is the most important thing in the Irish economy and will remain so for the next ten years, Mr Brown states. He says that if we pay 6% on our debt our interest repayment comes to €12-13 billion, but if we pay 1-2%, our repayments amount to €2.5-4 billion. To this end, the National Treasury Management Agency is the most important economic issue in the whole of the state, he states. Money is so cheap now that borrowing and spending it to create jobs is a good policy, he adds.
On Greece, Mr Brown says the situation there is the "ultimate kick the can down the road" scenario. He says the Greece situation is really very simple - the country has €300 billion in debt which it will never be able to replay and is heading for a massive default. He says that international creditors are lending to Greece, and are pretending they can make the repayments. They are also pretending that Greece can raise the taxes it needs and pretending it can grow its economy. He predicts the Greek situation will fall apart at the seams in about six months time and Greece will see a massive default.
MORNING BRIEFS - DCC, the international sales, marketing, distribution and business support services group, has completed the purchase of the Esso Express unmanned retail petrol station network and the Esso Motorway concessions in France.
*** The Japanese stock market continues to have a strong year. The Nikkei 225 closed at its highest level since December 1996 today and is up around 20% so far this year. Confidence has been boosted by signs that the Japanese economy is picking-up. Japanese firms have also helped by raising dividends and launching share buybacks.
*** Another possible hold-up for IAG's purchase of Aer Lingus looms as EU officials raise competition concerns over Heathrow landing rights and transatlantic routes. The European Commission's competition law directorate raised concerns with IAG over some aspects of its €1.4 billion bid for Aer Lingus at a meeting attended by both companies in Brussels in the last few days. The mergers watchdog is checking whether an IAG takeover of Aer Lingus would be bad for competition in landing and take-off slots at London's Heathrow Airport.
*** Media firm UTV has said its six-month old Irish television venture is struggling to hit audience targets and that it is going to miss its original financial targets. The company has reviewed its financial guidance and says it now expects UTV Ireland to make a bigger-than-expected loss of €16.2m in 2015. Before the launch, UTV Media had predicted the new station would lose €3m in its first year. In March, it increased that estimate to a loss of €6m, and earlier this month warned the loss had increased again, to €8.5m. The company says the new channel, which features its own sports and news programmes and a chat show presented by Pat Kenny, is performing poorly during the daytime and at weekends.
*** Google has launched a free version of its music streaming service, looking to upstage Apple's service which launches next week. Google Play Music has offered a $9.99 per month subscription service for two years but yesterday's launch is the first free version of the streaming service. Apple said earlier this month it would launch a music streaming service on June 30 for $9.99 per month along with a $14.99 per month family plan, with a free three-month trial.
*** The Miami Dolphins American football team owner Stephen Ross is reportedly working with investors from Qatar to buy a stake in Formula 1 racing. RSE Ventures and Qatar Sports Investments plan a bid for CVC Capital Partners' 35.5% stake in the holding company that owns F1. The deal could be worth up to $8 billion, and help build F1's presence in the US.