Ireland continued to lose ground on the bond markets last week as key sovereign interest rates here crept higher than those demanded from Portugal.
Market figures suggest that the annual cost for the government to borrow money for ten years rose by 17 basis points, or 0.17%, to 4.83%. It was the second-largest rise for any country in the eurozone in the last five days, suggesting that investors are again focusing on the perceived weaknesses of the Irish and Spanish banks amid fears they will throw off more losses for the public purse.
Equivalent ten-year borrowing rates for Portugal, which needs to raise about €25bn from bond markets by the end of the year, rose only six basis points to 4.67%. Key Spanish rates rose to 4.2% before Fitch Ratings stripped it of its top AAA rating.
The figures suggest that, ahead of the next debt issuance on 15 June by the National Treasury Management Agency bond-holders will demand a significant premium to buy Irish debt. Key Irish rates on Friday were over 2% – or 215 basis points – above those in Germany.
However, the interest rates demanded from governments to borrow for two years suggest a slightly more reassuring story.
The cost of borrowing for two years for the Irish government last week was 2%, lower than the 2.2% rate markets demanded from Spain and the 2.5% rate asked from Portugal.
By comparison, markets demand that Germany pay an annual interest rate of only 0.5% on new money it borrows for a two-year term.