Irish bond yields fall to 4-month low

Irish government bonds rose, pushing 10-year yields to the lowest level in four months, as it prepares to exit the financial bailout program that it entered almost three years ago. Italian and Spanish securities also advanced.

“The news that Ireland plans to exit its bailout program is maybe also proving positive for the other peripheral countries,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “Spain and Italy are in a different camp from Ireland but I wouldn’t rule out a bit of sentiment coming across. However, the US debt issue is still dominating everything and there remains hope this can get resolved, which is keeping yields stable.”

Ireland’s 10-year yield fell four basis points, or 0.04 percentage points, to 3.68 per cent at lunch-time today, after dropping to 3.67 per cent, the least since May 31st. The 3.9 per cent bond due in March 2023 rose 0.28, or €2.80 per €1,000 face amount, to €101.725.

Talks on Ireland's exit from its bailout programme are set to gain pace this month, with Minister for Finance Michael Noonan set to travel to both Strasbourg and Washington to discuss the country's options. Taoiseach Enda Kenny said at the weekend that Ireland would exit its three-year bailout on December 15th.

Mr Noonan will travel to Strasbourg on October 23rd and October 24th to meet European Commission and European Central Bank staff, before flying to Washington for meetings with the International Monetary Fund (IMF)on October 28th.

According to the Department of Finance, the talks will focus "on what options may be available to Ireland as it exits the bailout, including potential backstops".

In Luxembourg today, Eurozone finance mainisters may discuss backstops and Ireland’s potential exit from the bailout programme, while Ireland’s bailout troika will begin their 12th review of the country’s bailout program on October 29th.

Meanwhile, a report from the IMF today said that tomorrow’s budget is “on track”, although it noted that buffers with respect to the 7.5 per cent of GDP deficit ceiling have narrowed. Consolidation efforts will continue in 2014 it said in its latest “Fiscal Monitor” report.

From a wider European perspective, the IMF said in the report that Europe has already achieved about two-thirds of the adjustment needed to broadly balance the budget, asserting that reaching these medium-term objectives is well within the bounds of what has been done in history.However, it warned that adjustment fatigue looms large as economic growth remains anaemic.

(Additional reporting Bloomberg)