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Dublin: 8 °C Monday 24 November, 2014

Banks collapse, bonds rocket as markets demand bailout finality

Shares in AIB, Bank of Ireland and Irish Life & Permanent all continue to dive, as the cost of government borrowing shoots up.

The cost of 10-year government borrowing has rocked this morning.
The cost of 10-year government borrowing has rocked this morning.
Image: Bloomberg

THE WORLD’S MARKETS have continued their demands for a conclusion to the Irish financial crisis and details on the ECB and IMF’s bailout package, as shares in Irish banks, the value of Irish bonds, and the worth of the euro all took massive dives.

Shares in the three financial institutions listed on the Dublin stock exchange have fallen for the third consecutive day this morning, with shares in Allied Irish Banks and Bank of Ireland both slipping by 5c each.

AIB shares are down to €0.28 each, a fall of 15%, while Bank of Ireland shares sat at €0.25c as of 9:25am this morning. IL&P is down by 6c, to €0.69.

The collapse in the value of their shares follows overnight reports that the Irish bailout would require the government to take further stakes in the banks, thereby diluting the value of existing shares.

Bank of Ireland shares now stand at just over half of their price at the close of business last Friday, while AIB shares have lost 35% and IL&P an even 40%.

No formal announcements have yet been made to the stock exchange, however, about the government’s intentions.

The value of the Euro has also taken a major hit, dropping by about 0.3% in the last few hours against both the US dollar and the Pound sterling.

The uncertainty over Ireland’s political future and whether the EU/IMF bailout will go ahead – a matter both the government and EU commissioner Olli Rehn says is dependent on the passage of the Budget – has seen the cost of Irish borrowing take further spikes this morning.

The cost of 10-year borrowing to Ireland – which would be made redundant if the bailout is secured, but important if the government is forced to seek traditional funding – had hit 8.679%, a massive jump on its morning price and up over 0.25%, at about 10am.

Borrowing over shorter terms has also become more expensive, with 8-year bonds trading at 8.445%, having opened at 8.05%.

The spread between Irish and German ten-year bonds has hit 5.84%, the widest it had been since before the bailout talks began.

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