Bond yields down again following ECB announcements

Scofflaw

Irish bond yields down, Spanish bond yields down, Italian bond yields down:

http://www.bloomberg.com/quote/GIGB5YR:IND

http://www.bloomberg.com/quote/GSPG5YR:IND

http://www.bloomberg.com/quote/GBTP10YR:IND

Greek bonds, not so, up instead:

http://www.bloomberg.com/quote/gggb5yr:ind

Might be seeing a separation of the salvageable from the unsalvageable.

cordially,
Scofflaw

sarumite

How long will it last though? We have been here before with the ECB announcing action, the markets immediately warming to the announcement and then the positive vibes fading once again.

Scofflaw

sarumite wrote: »

How long will it last though? We have been here before with the ECB announcing action, the markets immediately warming to the announcement and then the positive vibes fading once again.

True enough. I think there's some differences this time - for example, this announcement follows the also positively received August one, and there wasn't such a slippage between the two. Also, this is the ECB announcing a pretty credible road map, whereas most previous announcements have actually been by the governments announcing bailout funds and tinkering, with a 'road map' that resembled Brownian motion. In addition, the positive market reaction on other occasions has actually been quite muted from the get-go, with large sections of the financial press, particularly in the City, almost immediately pouring cold water on whatever had been announced, usually because the ECB showed no signs of backing it.

We'll see, obviously, but at the end of the day the ECB really does have pretty much unlimited firepower to bring to bear, unlike the governments.

cordially,
Scofflaw

Godge

sarumite wrote: »

How long will it last though? We have been here before with the ECB announcing action, the markets immediately warming to the announcement and then the positive vibes fading once again.

They are down on 1 month ago and they are down on 1 year ago so what's the problem?

sarumite

Godge wrote: »

They are down on 1 month ago and they are down on 1 year ago so what's the problem?

The problem is that we have seen this before. The bonds fall, the optimisms fade, the bonds rise. I am wondering if this is another short lived fall in bonds or is there room for more cautious optimism that this is something more tangible than before.

Scofflaw

sarumite wrote: »

The problem is that we have seen this before. The bonds fall, the optimisms fade, the bonds rise. I am wondering if this is another short lived fall in bonds or is there room for more cautious optimism that this is something more tangible than before.

I'm going with the latter. Looking at the last year, the Irish results are following pretty much a year long trend of falling, although this fall is particularly steep. And in terms of "seeing all this before" - no, I don't think we've actually seen this before.

And note that the ECB haven't even engaged in the promised bond-buying yet. They've only promised that they will be a 'buyer of last resort', for countries with reform agreements.

I suspect that some kick-back against this is likely to come from Spain.

cordially,
Scofflaw

later12

Scofflaw wrote: »

Also, this is the ECB announcing a pretty credible road map

Depends what you mean by credible. SMP purchases are by their very definition a limited tool. They can work fantastically well for the smaller sovereigns like Ireland, but the firepower needed to control market prices for primary issuance
in an effective way for the likes of Italy and Spain would be so tremendously expensive over a long period of time that you really have to wonder about its capacity to deliver lasting results. I think that's a big concern for investors, who I suspect would much rather the ECB simply being given the capacity to buy primary debt directly, subject to some programme conditionality mechanism (which, this isn't - and that's another problem).

antoobrien

later12 wrote: »

Depends what you mean by credible. SMP purchases are by their very definition a limited tool. They can work fantastically well for the smaller sovereigns like Ireland, but the firepower needed to control market prices for primary issuance
in an effective way for the likes of Italy and Spain would be so tremendously expensive over a long period of time that you really have to wonder about its capacity to deliver lasting results. I think that's a big concern for investors, who I suspect would much rather the ECB simply being given the capacity to buy primary debt directly, subject to some programme conditionality mechanism (which, this isn't - and that's another problem).

While it may be more immediately obviously of benefit to Ireland and the other smaller economies, it will have a psychological effect for the larger economies as investors won't demand higher prices if they see the ECB undercutting them.

There is another advantage to this proposed scheme in that the ECB are saying they will take a hit in the case of a default. That is not in any of the Eurozone's nations interest and they all have capital invested with the ECB (which in theory the have a call on) - in effect they'll be in effect robbing their right pocket to put money in the left one.

later12

antoobrien wrote: »

While it may be more immediately obviously of benefit to Ireland and the other smaller economies, it will have a psychological effect for the larger economies as investors won't demand higher prices if they see the ECB undercutting them.

Yes, there's a possibility that's entirely correct. However, the expense of such measures for such major economies is likely to remain an ongoing concern for funds. This new measure is a very messy way of doing what should be a very straightforward business - and is, for most central banks.

One major problem we have with the Euro is that whilst we here in Europe tend to be more familiar with its architecture and the complex political sensitivities surrounding integration and fiscal/ monetary policy, a lot of outsiders do not. I think the Americans in particular have been scratching their heads at our behaviour over the past two years in particular since SMP was announced. I think most people are thinking "why are they making this so difficult for themselves"? It's not a question I find easy to answer.

Just to clarify something I said earlier, I said this new program did not have conditionality attached. It does, actually, it just isn't monitored as part of the troika programme of assistance, and is something the ECB will be doing by themselves. Again, legal reasons I suppose.

Slydice

Interesting related blog:
http://trueeconomics.blogspot.ie/2012/09/992012-some-pretty-big-moves-in-cds.html

Taxi Drivers

Anyone looking at the yields today? WOW!

antoobrien

Taxi Drivers wrote: »

Anyone looking at the yields today? WOW!

That's probably because the German courts said Ja to the ESM.

The 1 & 2 year bonds had lowered somewhat over the past few months, this seems to having the effect of helping to (further) stabilise the longer term bonds.

later12

This is a very significant finding:

The court ruled the ESM treaty must be interpreted in a way that bans it from borrowing from the ECB, since this would violate EU law. The ESM also can’t be allowed to deposit bonds, including those acquired on the secondary market, with the ECB as collateral for loans, according to the judgment.

What the court is explicitly saying is that the ESM is an agency of the member states, and not a bank. This shuts down the possibility of the ESM being given a banking licence. It can also have implications for this banking union we're anticipating.

What this means is that the ESM cannot be a counterparty to the ECB, which would have been a wonderful way of getting around Article 123 of the Treaties.

Barring some dramatic change of fortune in the Eurozone, it's terrifically hard to see how Article 123 will not now have to be amended in the medium term, say the next 3 years. I smell a very controversial Referendum.

ardmacha

Lets hope that Irish pension funds were holding some Irish bonds, as these have now appreciated in value, restoring the value of the funds.

not1but4

It just keeps dropping down to 5.053% now
http://www.bloomberg.com/quote/GIGB8YR:IND

catch.23

not1but4 wrote: »

It just keeps dropping down to 5.053% now
http://www.bloomberg.com/quote/GIGB8YR:IND

The 9 Year yield is generally used as the benchmark atm I think? At 5.27%, pretty good either way.

not1but4

8 year bond down to 4.81300 and 9 year bond down to 4.99000.

Laminations

not1but4 wrote: »

8 year bond down to 4.81300 and 9 year bond down to 4.99000.

Good news alright. Pity people can't see that

EURATS wrote: »

So far they(FG) have proved that they come from the same sewer as FF. labour have been a let down but not a surprise. SF have actually performed quite well which was a surprise.

FG are traitors. Lining their own pockets like the last shower. Have achieved little or nothing to remove us from the sh1thole that we are sinking in. In fact They have added to it.

The real sad thing is that a lot worse has yet to come.

This reduction in bond rates will not be credited to the government by many people. Oddly if a reduction wasn't forthcoming the self same people would blame the government.

Sand

Laminations wrote: »

This reduction in bond rates will not be credited to the government by many people. Oddly if a reduction wasn't forthcoming the self same people would blame the government.

You would credit the government for the decline in bond yields on the secondary market? Odd. Surely it was ECB intervention and reversal of the ECBs deranged and failed policies from the Trichet era? The same people celebrating the reversal of those stupid ECB policies were defending them as true and just back in 2010 and 2011.

For my own part - I remember not so long ago the defenders of the government arguing that Irish economic growth relies on factors outside the control of the government so they shouldn't be beaten over the head with terrible Irish economic performance. I noted then that if the government stopped trying to take credit for economic growth when it was good, people would stop giving them stick for economic performance when it was bad.

The gain on the secondary market is good news for holders of existing Irish debt as it allows them to either make a profit or at least reduce their loss. And... that's about it. Even the ECB intervention is dependent on Ireland allowing the ECB to dictate fiscal policy to us.

Meanwhile the governments true performance can be noted by its hamfisted efforts to secure a deal, any deal at all on the promissory notes. I am completely bemused at this point by what exactly will be achieved even if a deal is secured - the promissory notes are the governments left hand giving money to the governments right hand. Any reduction in their terms simply stores up more trouble for the near future - it would be classic short term thinking. Eliminating the promissory notes and replacing them with standard government debt would eliminate the supposed benefit of the promissory notes in the first place - that they would be separate to actual government debt. And if Ireland ever wants to get a debt deal of real value it would be useful to ensure that Irish sovereign bonds are not defaulted on.

And lets not forget the governments handling of public sector reform of archaic allowances which ended in humiliating defeat.

You really think those same clowns went out there and took something from Europe that was of any value to us?

Voltex

If I could invest in something that will yield 5% , Id be on it like a hot snot.

Sand

Have you considered Greek bonds? They just dropped below 20% yields for the first time since March - afterall, why invest in a 5% return when you can get a 20% return.

Voltex

Sand wrote: »

Have you considered Greek bonds? They just dropped below 20% yields for the first time since March - afterall, why invest in a 5% return when you can get a 20% return.

Because theres already been a PSI and the greek economy is just not able to bare the level of debt it has, its just not productive enough.

amacca

Bit off topic but have you considered a good etf/index tracker?

when 30 week ma goes above 50 week ma buy in, sell off when it dips below.

you should get your 5% out of that with a bit of research and discipline.

On topic: so things seem to be stabilized for the time being?

suckslikeafox

Voltex wrote: »

If I could invest in something that will yield 5% , Id be on it like a hot snot.

Agreed that it's a safe enough investmen but 5% is pretty weak, given how SPX, etc are up around 28% yoy.

Voltex

sorry off topic again for a moment;

Agreed that it's a safe enough investmen but 5% is pretty weak, given how SPX,
etc are up around 28% yoy.

I suppose if your investing part of your portfolio in soverigen bonds, gilts, t-bills, its supposed to be safe, secure, low volume, predictable performance, so 5% IMO is still on the high side of a secure investment.

Looks like the Northern League of creditor nations are trying to kybosh the intentions of the new ESM..bastards!!

http://www.rte.ie/news/2012/0926/key-euro-zone-states-cast-doubts-over-bank-deal-business.html

petersburg2002

Looks like the Germans, Dutch And Finns have just undone a lot of the progress made over the last few months. Why cant they keep their mouths shut? Yet more uncertainty now, again!

Brussels Sprout

petersburg2002 wrote: »

Looks like the Germans, Dutch And Finns have just undone a lot of the progress made over the last few months. Why cant they keep their mouths shut? Yet more uncertainty now, again!

What does this mean for Ireland and our national debt?

antoobrien

Brussels Sprout wrote: »

What does this mean for Ireland and our national debt?

Nothing - the promisory notes are already part of it. The only thing that has changed since yesterday is that the prospect of getting them off the debt is lower.

Scofflaw

antoobrien wrote: »

Nothing - the promisory notes are already part of it. The only thing that has changed since yesterday is that the prospect of getting them off the debt is lower.

That would involve the prospects becoming negative, surely? There hasn't ever really been a realistic prospect of getting the Anglo debt taken over, and it was, as far as I can see, ruled out entirely in June.

The hope with Anglo debt has always been an extension of the payback period.

cordially,
Scofflaw

Voltex

9 year Bond closing at 4.99%. Pretty good going.
http://www.bloomberg.com/quote/GIGB9YR:IND/chart

catch.23

Big drop this morning, down to 4.78%, lowest since May 2010.

http://www.bloomberg.com/quote/GIGB9YR:IND/chart

roro2

catch.23 wrote: »

Big drop this morning, down to 4.78%, lowest since May 2010.

http://www.bloomberg.com/quote/GIGB9YR:IND/chart

Seems to be a reaction to a Wall St Journal article that reports that Moody's may remove its negative outlook on Ireland if the EU agree to reducing some of the burden of the banking debt. A big "if".

catch.23

Interestingly, the 1 year bond is now on 1% - obviously there is some confidence that we're ok for the short term anyway! Down from 7.5% in January.

petersburg2002

roro2 wrote: »

Seems to be a reaction to a Wall St Journal article that reports that Moody's may remove its negative outlook on Ireland if the EU agree to reducing some of the burden of the banking debt. A big "if".

10year Bond now at 4.5% and dropping

antoobrien

petersburg2002 wrote: »

10year Bond now at 4.5% and dropping

Interestingly as of 4.06pm the 2 year bond is more expensive than the 3 year (1.71 v 1.64).

catch.23

petersburg2002 wrote: »

10year Bond now at 4.5% and dropping

There are no 10 year bonds, and the 9 year hasn't been lower than 4.73 all day.

phoenix999

catch.23 wrote: »

There are no 10 year bonds, and the 9 year hasn't been lower than 4.73 all day.

It was 8 year I meant:

http://www.bloomberg.com/quote/GIGB8YR:IND

http://namawinelake.wordpress.com/about/pigs-10-year-bond-yields-bloomberg/

Ben D Bus

phoenix999 wrote: »

It was 8 year I meant:

http://www.bloomberg.com/quote/GIGB8YR:IND

http://namawinelake.wordpress.com/about/pigs-10-year-bond-yields-bloomberg/

The 8 year is gone from Bloomberg today? Just a glitch?

antoobrien

Ben D Bus wrote: »

The 8 year is gone from Bloomberg today? Just a glitch?

Removed from the public site - sign up for bond related goodness.

Ben D Bus

antoobrien wrote: »

Removed from the public site - sign up for bond related goodness.

But I can still see the rest of the PIIGS on the public site

Head The Wall

We're different, don't ya know

Scofflaw

Head The Wall wrote: »

We're different, don't ya know

Bloomberg are probably paywalling content on the basis of popularity, and I daresay Irish bond yields have been the most obsessively checked...

cordially,
Scofflaw