Yesterday’s Irish bond auction went well, however, there continues to be a disconnect between the market and the media. We continue to hear that everything is fine – that the ECB is willing to step up whenever necessary, however, the markets continue to tell a different story. Martkit’s Gavin Nolan detailed yesterday’s action, which has been a microcosm of the macro environment:
Ireland’s spreads tightened after the auction results were announced. However, the 20bp gains were short-lived, and Ireland’s spreads are now more or less unchanged from yesterday’s levels, i.e. close to record wides. Even though the sovereign is fully funded for 2010 and this auction was pre-funding for 2011, investors are concerned that its broken banking system could force it to seek external aid and/or restructure in the medium-term. Such fears have been allayed on Spain, at least for the time being. The country also sold debt today, and it had little difficulty in placing EUR7.036 billion of 12- and 18-month T-bills, slightly more than the EUR6-7 billion indicative range. Bid-to-covers were down from the previous auctions but that was no great surprise given the size of the debt sale. Greece continued to outperform after it saw strong demand for EUR390 million 13-week T-bills.
Irish 10 year yields were lower on the day, but at 6.3% remain just shy of their all-time highs. The market appears to be increasingly concerned about the funding crisis across Europe, however, you would never know it from the reports on financial TV and the mainstream media.
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