Irish Debt-Insurance Costs Rise, Other Peripherals Unchanged

By Mark Brown

LONDON–The cost of insuring Irish sovereign debt against default using credit derivatives rose Thursday morning, while the cost for other peripheral euro-zone members was largely unchanged.

Irish voters go to the polls in the Donegal South West by-election Thursday, which could put further pressure on the country’s coalition government.

Ireland’s five-year sovereign CDS were 0.19 percentage point higher at six percentage points, according to Markit data, while Portugal’s were 0.02 percentage point lower at 4.8 percentage points and Spain’s just 0.01 percentage point higher at three percentage points.

Belgian and Italian CDS were both unchanged at 1.49 percentage points and 2.02 percentage points, respectively, while Greek CDS were 0.07 percentage point tighter at 9.65 percentage points.

CDS are derivatives that function like a default-insurance contract for debt. If a borrower defaults, sellers compensate buyers, who may be protecting investments, or making bearish bets against companies or countries.

A 0.01 percentage-point rise or fall in the cost of five-year CDS equates to a $1,000 rise or fall in the annual cost of protecting $10 million of debt for five years.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Irish Bank Shares Fall; Government May Raise Stake in Bank of Ireland

By Vladimir Guevarra

LONDON–Irish bank shares continued to slide Wednesday on mounting expectations that the Irish government is likely to take a majority stake in the Bank of Ireland as part of a rescue package worth close to €85 billion from the European Union and the International Monetary Fund.

Shares in the Bank of Ireland were down 10% at €0.27. Allied Irish Banks PLC, whose government ownership will rise to around 95% after a planned rights issue, was down 19% at €0.27. Irish Life & Permanent, which so far hasn’t received any state aid, fell 0.4% to €0.75. The Irish ISEQ Financials index has fallen around 36% since Friday.

The Irish government is trying to stem its losses from the banking sector, which are largely the result of overlending in a decade-long property boom that crumbled in the financial crisis, while getting the banks to reduce their reliance on European Central Bank funding. A majority stake in the Bank of Ireland would leave Ireland without a significant lender free of state control.

Irish bank shares have been under pressure since the Irish government said Sunday that it had formally applied for tens of billions of euros in aid from the EU and IMF. Both have indicated that the money will be forthcoming, pending negotiations on the steps the government will have to take to restructure its debts and cut its budget deficit.

The government currently owns 36% of Bank of Ireland, but that could rise to 80%, based on an equity injection of around €3.5 billion, which would raise Bank of Ireland’s trough core Tier 1 ratios to 12%, said NCB Stockbrokers analyst Ciaran Callaghan.

MF Global analyst Simon Maughan also said it was likely the government would take a majority stake in the Bank of Ireland. However, Mr. Maughan says that prospect is a “suboptimal situation” and “it’s better for BoI bondholders to do a debt-for-equity swap and keep the government as a minority shareholder” in order for the Bank of Ireland to be a more independent bank. Maughan kept his sell rating on the Bank of Ireland.

The Financial Times reported that the Irish government is in talks to take a majority stake in Bank of Ireland, citing government officials.

Credit analysts at Moody’s Investors Service on Monday said they expect another €8 billion to €12 billion to be injected into Ireland’s banks, and that it would take around €0 billion to increase the core Tier 1 capital ratios of Bank of Ireland, Allied Irish, EBS and Irish Life & Permanent to 12%, above the central bank’s current 8% target.

Prime Minister Brian Cowen on Sunday said the 8% target probably wasn’t enough to appease markets. He said banks would also have to shrink their operations and sell off non-essential business lines and assets to return to health.

A spokesman from the Bank of Ireland declined to comment. A spokesperson for the Irish government couldn’t be immediately reached for comment.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Irish Bank Shares Fall After Bailout News

By Margot Patrick

LONDON–Shares in most Irish banks tumbled Monday after Ireland ministers said the banks will need more capital as part of the country’s massive bailout package agreed late Sunday.

Ireland said it has applied for a bailout worth tens of billions of euros from the European Union and the International Monetary Fund, sparking a rally in the euro, euro-zone government debt and Asian stocks overnight.

Irish bank shares sank, though, after Ireland Prime Minister Brian Cowen on Sunday said more capital will likely be put into the country’s banks to reassure investors, and that the banks will be made smaller “so that they can gradually be brought to stand on their own two feet once more.”

Shares in 36%-owned Bank of Ireland PLC, which could end up in further state control as part of the bailout, fell 10% in London to trade recently at €0.44, while Irish Life & Permanent, which so far hasn’t received any state aid, was off 13% at €1.

Shares in Allied Irish Banks PLC, which is already planning a rights issue that will take the government’s stake to more than 92%, was flat at €0.45 in London trade, reflecting the reduced scope for additional shareholder dilution compared with its peers.

“The extent of dilution facing shareholders is likely to be significant, and will ultimately be determined by the results of the stress tests combined with the new regulatory thresholds to be reached,” said Ciaran Callaghan, a banks analyst at NCB Stockbrokers.

Shares in Royal Bank of Scotland Group PLC, which has about ￡54.4 billion in direct exposure to Ireland, were up 0.3% at 42 pence, while Lloyds Banking Group PLC, with around ￡27 billion in Irish loans, were up 0.7% at 67 pence.

Finance Minister Brian Lenihan said the bailout package will include a contingent fund for banks to draw upon to cover bad loans, and to serve as “a powerful demonstration of the firepower behind the banks.”

Further efforts will be made to downsize the banks by selling overseas and nonessential assets, he said.

Already, Allied Irish Banks has raised about €2.5 billion by selling its Polish unit to Spain’s Banco Santander SA, and made a capital gain of around €900 million from the disposal of its 22.4% stake in M&T Bank Corp.
last month. But it put on hold a plan to sell its U.K. unit earlier this month, citing insufficient bids.

The bank said Friday it would raise around €6.6 billion from a larger-than-expected rights issue later this month that will take the state’s stake above 90%.

Anglo Irish Bank Corp., which was fully nationalized last year, and Bank of Ireland are also trying to dispose of assets.

Other state assets after taxpayer bailouts include Irish Nationwide Building Society and the Educational Building Society.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Irish Funding, Insurance Costs Hit Record

By Emese Bartha

The cost of insuring Irish debt against default hit a fresh record Friday with investors fearing that Ireland’s draconian budget cuts will slow economic growth and further weaken public finances.

Spreads on Irish five-year sovereign credit default swaps topped 6.10 percentage points Friday, according to data provider Markit, after having briefly touched 600 basis points Thursday. This means that investors will have to pay €610,000 annually to ensure €10 million Irish debt against default. Some market watchers note that CDS trading starts to dry up at these levels as investors worry about being caught on the wrong side of the trade.

CDS are tradable, over-the-counter derivatives that function like an insurance contract for defaulting on debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. The Irish 10-year yield spread over German bunds, which show how large a premium investors demand to hold Irish bonds versus more-stable German debt, also hit a record of 5.31 percentage points Friday.

“We doubt that next year’s €6 billion fiscal squeeze will be enough to ensure that the Irish government’s 2011 budget deficit goal will be met,” Ben May, European economist at Capital Economics, said in a note.
“This, combined with rising political uncertainty and surging bond yields, implies that Ireland may struggle to solve its fiscal problems unaided,” he said. But he noted that Ireland’s decision to front-load its austerity measures is “clearly encouraging.”

The Irish government said late last month that it would need to make budget cuts of €15 billion over the next four years in order to reduce the country’s budget deficit to 3% of gross domestic product by 2014, as previously agreed with the EU.

Ireland’s budget deficit is expected to reach a euro-area record of 32% of gross domestic product by the end of 2010, largely because of costs related to recapitalizing the banking sector.

The government expects its budget deficit to be between 9.25% and 9.5% of GDP in 2011. It also forecasts little economic growth this year but expansion by 1.75% in 2011, 3.25% in 2012, 3% in 2013 and 2.75% in 2014. Ireland’s government had previously forecast growth of 3.3% next year and 4.5% in 2012.

JP Morgan economist David Mackie said that gauging the impact of fiscal consolidation on economic growth isn’t easy but the growth projections in the new plans “still look ambitious.”

“The cumulative fiscal adjustment may still need to be greater, either if the equilibrium primary position is more positive than the government is currently assuming or if growth fails short of the new projections,” he said.

Details of Ireland’s economic and budgetary outlook from 2011 through 2014 will be given Dec. 7.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Irish CDS Spread Hits Fresh Record

By Art Patnaude and Irene Chapple

The Irish five-year credit default swap spread widened to another new record Wednesday as political pressures continued to sour sentiment on the country’s debt.

The resignation of Fianna Fail party member Jim McDaid Tuesday lowered the government’s majority in parliament to just three, raisng more doubt whether the budget will be passed by the December deadline.

Credit market investors are closely watching the government’s attempts to put the nation back on a stable financial footing, one trader said. “It’s a massive task, it’s a herculean task, and there are credit investors speculating it is beyond the government’s capabilities,” he said.

The spread on Ireland was 15 basis points wider at 538, after widening 27 basis points Tuesday, according to Markit. This means it now costs an average of $538,000 a year to insure $10 million of debt issued by the company. Cash bonds are also under stress, with the 10-year bond yield at 7.398% from Monday’s low at 7.02%, 495 basis points over the benchmark German bund.

CDS are tradable, over-the-counter derivatives that function like a default insurance contract for debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against countries.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

More disorder Greek, Irish and Portuguese)

By Dave Kansas

Peripheral zone euro have another day gross, especially Greece, Ireland Portugal.

Spread on 10-year bonds Greek German raised similar vs expanded 8.31 percentage points larger than 6.96(1) just a week ago percentage points way .the ' Ireland is 4.51 percentage points more wide, although more than 4.15 percentage points last week.Portugal is 3.56 3.43 percentage points percentage points.

According to the IFR, the research workshop, European banks are intervene to attempt to raise the "peripheral markets, with Greek bonds particularly need help grieving."Central banks have been well yesterday.Deutsche Bank also indicates that central banks have intervened in support of peripheral connections.

Predatory this morning a lot of fundamental reasons - the Greece fiscal mess is still a mess, Ireland is still faced with a banking problem of huge parties opposing the Portugal continue competing better budget for the future.

But a new ride is a story in the Daily Telegraph in London that describes how bond may get bitten by proposed stricter EU restructuring directrices.IFR desrcibes reaction of market history of Telegraph lines in the range of 5 years as a "panic mode" link.

Swap credit - default is a relatively thin market in most markets bond soveriegn, are also reinforce the trend between périphériques.Markit, an enterprise database market, says fresh CDS have increased by 5% to 10% for the Ireland, the Greece and the Portugal this morning.

Perhaps that is why European stock markets are so hot today.

This entry transmitted via the service for full-text RSS - if this is your content and you read on someone to another site, please read our FAQ page fivefilters.org/content-only/faq.php
Article five filters features: After Hiroshima - non-rapport Cancer Catastrophe of Fallujah.

View the original article here