Ireland – What Now?

- "Ireland’s recent widening has been a function of both lower German yields and higher Irish yields."
- "According to our estimates, €13bn of Irish government guaranteed bank debt expires in September - and over half of this on just two days. Any difficulties that the banks have in rolling over debt could further damage market sentiment."
- "Although Ireland’s significant prefunding has reduced its vulnerability, this is unlikely to be sufficient to reverse sentiment and counteract positioning. Spreads will retighten only once buyers outweigh sellers. Short term that seems unlikely."
- "We are not confident that this is the turning point for Irish spreads. The momentum is for further widening, especially in thin summer markets and with trapped longs overhanging the market. In the absence of any substantive positive news, the risk is that spreads go even wider before they tighten a little."
- "The immediate potential danger is that the news feeds on itself and we see another peripheral spiral. The widening could easily spread in the current mood."


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