Irish bond yields spiked today as the collapse of Portugal’s budget discussions and Greece’s tax revenue shortfalls reignited concerns that peripheral European countries may struggle to cut their deficits.
The yield on Ireland’s ten-year bonds closed at 668 basis points today, the highest level in almost a month, while the spread between Irish sovereign debt and the benchmark German bund rose to 412 basis points, up from 393 yesterday.
However Dublin analyst Donal O’Mahony of Davy stockbrokers warned that these movements should be interpreted with extreme caution as volumes are currently “wafer thin”. As a result, Irish bonds are in a “bit of a no-man’s land” and are “like confetti in the wind” for the time being.
Ireland was the second-worst performer in Europe today, after Greece, in terms of widening spreads.
Greece’s 10-year yield rose 79 basis points, the most since June 15th, and its spread with bunds widened to 779 basis points, the highest in more than three weeks.
The yield on Portugal's 10-year bond increased 24 basis points, the most since September 20th, to 5.93 per cent as of 3.39pm in London. That left it at 328 basis points, up from 312 earlier in the day.
Mr O’Mahony noted that Irish bonds had enjoyed two “robust” sessions on Monday and Tuesday, with the spread against bunds narrowing. However that improvement was “scuppered” today by the developments in Portugal.
Additional reporting: Bloomberg