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ISEQ steady-Irish bond yields rise

Wednesday, February 27 09:36:54

The ISEQ is steady this morning as European markets regain some of the ground lost following the Italian election results.

European bond yields are rising and today's Italian bond issue will be carefully watched for further signs of deterioration.

Davy Stockbrokers comments:

Irish bond yields rise as Italian election threatens to re-ignite European debt crisis European stock markets fell heavily on Tuesday as uncertainty around the outcome of Italian elections continued to weigh on sentiment. The Euro Stoxx 50 closed down 3.1pc now back to similar levels as in early December.

The FTSE MIB index of Italian shares closed down 4.9pc, the Spanish IBEX 35 by 3.2pc, the CAC40 by 2.7pc and the Dax by 2.3pc. Benchmark Italian sovereign yields rose by 36bps yesterday, Spanish yields by 16bps, Portugal by 38bps and Greece by 24bps. In contrast, German and French government yields fell slightly, benefitting from the flight of capital from the periphery to the core. The bid-yield on the Irish 8-year bond rose to 3.9pc at the close, up sharply from 3.66pc on Monday, demonstrating that Irish funding costs remain vulnerable to broader European events.

In contrast, the S and P 500 rose 0.6pc yesterday. This followed a sharp rise in the US Conference Board measure of consumer confidence to a reading of 69.6, indicating that household sentiment has bounced back after the impact of the US payroll tax cut in January. Furthermore, data on US new home sales in December showed the highest level since August 2008, with the Case-Shiller measure of house price inflation rising to 7.3pc in the year to Q4 2012. Markets were also reassured by Fed Chairman Ben Bernanke's testimony to Congress, indicating that the current asset purchase programme is likely to continue.

Irish labour market data for Q4 2012 are released today. We already know from last week's earnings release that public sector employment fell by 4.3pc in 2012. Stripping out this fall from the aggregate employment figures indicates that private sector employment rose at a robust pace, by 1.5pc in the year to Q3 2012. So although the final figures for aggregate employment growth in 2012 are likely to be weak, the underlying trend in private sector employment may be stronger than the headline figures suggest according to Davy Stockbrokers.