Wednesday, November 10, 2010

European Debt Update

by Calculated Risk on 11/10/2010 04:05:00 PM

Note: Some people have asked why I've posted so often about Ireland the last few weeks, I think these hockey stick graphs show why ...

Ireland 10-year bond yield at 8.64%.

Portugal 10-year bond yield at 7.04%.

And for Spain, the 10-year bond yield has risen to 4.5%.

And for Greece, the yield is up to 11.55%.

From the WSJ: European Debt Markets Take Hits

And from the Financial Times: Irish bond yields leap after selling wave

Last week LCH.Clearnet warned investors of higher margin requirements to trade in Ireland’s debt. That went into effect today - here is the memo:

The margin required for positions of Irish government bonds will consequently be increased by 15% of net exposure ... The additional margin will be charged on net exposure at close of business on Thursday 11 November 2010 and will be reflected in a margin call on Friday 12 November 2010.
There is no immediate liquidity crisis for Ireland (unlike for Greece earlier this year), but clearly bond investors are spooked by the discussions of bond holders having to take haircuts if there is a bailout. And if yields stay above 8% that increases the likelihood of Ireland using the European Financial Stability Facility (EFSF).