What should buyers of 4 year bonds consider before putting (other peoples') money into Ireland?
NTMA to tap bond markets ∑ Business ETC
Firstly, the positive track record:
- no senior Bondholder for banking debt has been left behind
- the troika is still in town for another few months to oversee the natives
- the permanent government will modestly propose the eating of children before the State defaults on sovereign debt.
- the recent overhyping of oversubscription for purchase of bills not over 3 months.
Secondly, the current state of play
- a deficit of €14bn being celebrated like it's 2009
- current plan is to have deficit to be 120% of GDP (growth has not met forecasts in at least 5 years)
- stability in government with same policies being pursued from September 2008 to present.
Thirdly, the problems coming down the tracks:
- years of austerity (excluding the Public Sector pay and pensions , headline SW rates and tax rates as they were electoral promises) to come, thereby dampening domestic demand of all taxpayers
- interest rates to rise from 0.5% causing thousands to default on mortgage, to cause banks to be further recapitalized thereby depleting monies available to repay bonds acquired by 2017 when tomorrows bond falls due
- long term problems such as huge hole in ability of State to pay State pension (as if), effect oil price increases on an island nation dependent on car travel, emigration and lower birth rate from 1990 reducing workforce/tax payers
- the euro crisis and risk of its breakup and being repaid in punt nua
- the risk of SF being in government after a 1915/16 election and keeping its promise to say not to put another (red) cent in banks, thereby making the leap to sovereign default being much smaller.
If you were an international Bank/bondholders would you take a punt on Ireland?