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ISEQ steady-Irish Bond yields examined

Thursday, September 27 09:03:26

The ISEQ is unchanged this morning at 3,269 as markets consolidate following a week of swings. Chinese Central Bank prime pumping is intended to encourage some movement in their domestic market which is increasingly important to World economic recovery. Irish bond yields have been swinging around also and Davy Stockbrokers looks at recent events this morning:

Yesterday (September 26th), Irish bond yields suffered their most significant rise since May. The asking price on the nine-year bond rose from 5.02pc to a high of 5.18pc. The statement from the Dutch, Finnish and German finance ministers that legacy assets should remain the responsibility of national authorities was interpreted by some commentators as an assertion that the ESM will not be allowed to directly capitalise Spanish and Irish banks.

However, both the Irish government and European Commission yesterday drew attention to the June 29th agreement by heads of government, indicating that the ESM will be able to directly recapitalise banks. Furthermore, it is worth noting that EFSF funds have already been earmarked to help recapitalise Spanish banks, albeit channelled through the FROB fund, with the ultimate liability remaining with the Spanish government.

Irish house prices rose by 0.3pc in August, according to yesterday's CSO release. House prices in Dublin fell by 0.7pc, the third consecutive monthly decline, and rose 1.1pc outside Dublin. Apartment prices rose 1.3pc in August, down 14.4pc on the year. However, with new mortgage lending below E1bn in H1 2012, transactions in the housing market remain abnormally weak. Yesterday's data show that prices fell in the most liquid segment of the market (Dublin), but we remain concerned about the overall quality of the price signals from the illiquid Irish housing market according to Davy Stockbrokers.