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Originally Posted by kerrynorth  An SBP article today is also acknowledging that Ireland is running out of an ability to borrow. It says that the €1billion raised last Tuesday when just €1.24billion was tendered compares with €3billion tendered for a similar €1billion bond offering from May last year. Therefore, only circa 40% of the money offered compared to a year ago. Sunday Business Post | Irish Business News |
Cover (i.e. ratio of bids to amount being sold) on euro government bond auctions is, strangely, a fairly meaningless number. For example, a huge chunk of Germany's auctions over the last two years have failed to achieve a cover of even one, which fact attracted huge media attention last November, as if it were a novelty. It's not.
Ireland's
ability to borrow isn't impaired - rather, the
cost at which it can raise funds has risen. They are two separate issues. That said, the cost of borrowing versus German costs has fallen sharply from the levels of late Jan/early Feb. It is as much the speed and extent of that decline (from 280 basis points, or 2.80%, to under 200bp at the end of this week, in 10 year maturities) that would have diminished the appetite of investors for last weeks offerings.
Ireland is effectively being ranked by markets as a single A entity, versus its majority rating of AA (and still AAA with Moody's, though that's due for review very soon). The cost of borrowing reflects this. The cover reflects little other than conditions in bond markets at a particular time on a particular day.
26th April 2009
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