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Irish bond yields close to record low

Monday, March 31 16:15:28

Irish sovereign bond yields were only 2 basis points (bps) off their record lows of 2.974pc today, latest figures show.

Lower-rated euro zone bond yields held near multi-year lows today, with an expected drop in euro zone inflation keeping speculation rife that the European Central Bank may loosen monetary policy further later this year.

Economists in a Reuters poll predicted a drop in inflation to 0.6 percent in March from 0.7 percent the previous week, but below-forecast Spanish and German inflation data on Friday raised expectations of an even smaller figure. The euro zone inflation figure is due for release at 0900 GMT.

The ECB is not expected to cut interest rates at its meeting on Thursday, a Reuters poll showed. But an inverted money market curve points to some expectation that it could eventually ease monetary policy.

Even if the ECB does not ease policy, it is likely that it will keep rates at record lows for a long time to bring inflation back towards its target of just below 2 percent.

That would keep yields on top-rated euro zone debt at ultra-low levels, pushing investors towards lower-rated bonds as they try to maximise returns.

Italian 10-year yields dipped 1.5 basis points to 3.29 percent on the day, having hit an 8-1/2 year low of 3.261 percent on Friday. Spanish yields fell 1 bps to 3.23 percent, just off an eight-year low of 3.20 percent.

Portuguese yields were flat at 4.05 percent, having dipped below 4 percent for the first time in four years on Friday.