A major new drama, Irish Bond Watch, played out on the international stage last week as 10-year government bond rates rose to 6.5%, the highest rate since we joined the euro in 1999. Bonds are IOUs that the government exchanges for much needed cash and the rates are the percentage at which the government borrows money. All the papers report on the significant increase in the amount we must pay to investors since the summer. Four year loans were 3.627% in August and 4.767% this week while eight-year bonds were 5.088% in June and now 6.023%.
In corporate bond news, junior bond holders in Anglo Irish Bank may also be told this week that they will get back as little as 25 cents on the euro, according to the Sunday Tribune. Subordinated bondholders, who hold €2.4 billion of Anglo debt, expected to lose it all two years ago when Anglo was nationalised but have been protected by the government until now. One source told the paper that these bondholders would “get singed, not burned” but that senior bondholders – who are akin to depositors – would be spared