http://blogs.cfr.org/geographics/

Maybe Ireland will be doing something similar with a ghost developement or two for similar sort of prices soon

http://www.mckinsey.com/mgi/reports/freepass_pdfs/debt_and_deleveraging/debt_and_deleveraging_full_report.pdf

A question for you. What would happen if all these bondholders decided to sell to bankrupt institutions and to invest in real assets? We assume that only corporations hold bonds and that these are public and eternal. Suppose the real wealth of a very few very rich individuals and dynasties was in jeopardy and they decided to withdraw? Eventually, there is no longer any money creating machine! Eventually, governments would print more money, but the essential control of a market is gone.

All we have then is governments competing to devalue…… chaos. Deflation one minute while inflation rages out of control in others. Husks where bond holding companies once stood, destroyed by weapons of mass financial destruction. Derivatives. It all happens soon.

The guarantee we were told for many months afterwards was a tremendous triumph.

We were still being told it as our banks utterly collapsed. This was followed by the huge deceptions of the NAMA debate. During this debate we were told repeatedly - including many times on this site - that sadly we were stuck with the bank’s losses because of this legislative guarantee. Removing it would utterly destroy the country. This terrorising came from the same people who now - without irony - condemn other people’s negativity.

3 years after the banks began to totter, more than a year after they completely collapsed, we are offered a pathetically limited secret inquiry, due to report in another year. So sometime four years after the banks began to totter we may read some of the truth. The guarantee that we are told means we must pay out tens of billions is excluded from the inquiry, as is the period when the banks collapsed, NAMA, and the many questionable activities ever since.

Not to mention that we have a huge chest of cash but we were constantly threatened with a brutal assault by the IMF right up to the budget. Then suddenly the recovery had started and a spending splurge was on the way.

Now how on earth could anyone be negative or cynical?

http://www.businessinsider.com/japans-hyperinflation-nightmare-2010-1#nobody-expects-japanese-hyperinflation-1

http://www.bloomberg.com/apps/news?pid=20601039&sid=aaIuE.W8RAuU

Hmmmmm coming together quite nicely! And as predicted. Remember that no food means 3 weeks to live….

The same people who say ‘absolutely’ when agreeing with the anchor on a blindingly obvious statement he/she has just made to them (usually a statement they try to make sound like a question) while they are reporting from a location. For example:

Anchor: So bond spreads widen when governments keep borrowing like there’s no tomorrow and, being a bunch of ex-teachers and people who have never had real jobs, demonstrate they have no idea about how to run an economy Darius.

Reporter: Absolutely, Damien. Indeed they do. And your ego is starting to look like it won’t fit through the door as you try to leave the studio tonight.

Anchor: We’re sorry, the line to Darius seems to have gone down.

Of course, outstanding journalists like myself have no need to resort to that.

Indeedy.

It’s Friday and I’m off to the pub.

Absolutely.

My guess is that when the pundits, the bond markets, the butchers, etc. have dealt with Greece they will then turn their attention to Spain and Portugal for a few weeks and they too will go through difficult times in the limelight. Then they will be back at Ireland and Italy. It’s not that we are better, it’s just that we aren’t quite as bad. We are not out of any woods, just standing at a junction on a path, wondering whether we should go down the route where we can hear the bear roaring or the other one, where we know that guy from the Blair Witch Project lives. It might be dark but we can hear Greece getting goosed somewhere out there so let’s proceed on tiptoe. Hush now.

thanks hadn’t seen that one

spot on. We have travelled some steps on the journey. Our spreads have narrowed in Sovereign land and the banks are even managing to sell some of their paper. Let us be realistic it is progress of a sort. It is over hyped on RTE and underhyped in here. However to borrow a football analogy we are closer to Leeds & can only aspire to the status of a Portsmouth. Plenty to go yet.

Talk that we’ve managed to distance ourselves from Spain, Portugal, Italy and Greece seems at best premature, and runs the risk of providing armoury for the still in denial ‘work to rulers’ as they set aggressively about the task of un-picking the December budget - oh the joys of Spring!

commented on link below. But i don’t think the “EU and ECB are having serious concerns about NAMA”. I think they are having very specific concerns about certain elements of it, and these will be sorted out in the next few weeks. Certainly, i am almost certain there is zero chance of it “getting shot down”.

http://www.irisheconomy.ie/index.php/2010/01/31/further-delays-on-nama/

There has been a lot of speulation on this blog over a lengthy period as to how bondholders and bond markets might behave in hypothetical situations. The reason for the speculation is that their behaviour is critical to our national and continental economic prospects.

One would expect there to have been empirical studies on bond market behaviour and dynamics. Can anyone enlighten us on these points? We have a lot of economists in our universities focussing on financial markets so I am hopeful that the expertise is out there.

My own instinct is that bondholders, like any lender, must be naturally capricious in dealing with issuers of bonds in order to encourage repayment. Therefore, the first debtor to test the bondholders’ willingness to tolerate partial default in a crisis is likely to get burnt. I also surmise that individual bondholders, and their agents, like a burnt creditor will tend to avoid any entity that has defaulted for the rest of their natural lives.

In relation to bond market dynamics, I would be interested to know how the following assumptions stack up:

1. In order to maintain a strong position borrowers (bond issuers) need to maintain the confidence of the majority of the market t=for their class of bond. However, if they lose the confidence of a few key participants in their section of the market then this can have a knock on effect and relegate them from that section altogether. Therefore, one requires a “filibuster” majority for confidence and, speaking of market participants mathematically (rather than analogising with human relationships), confidence can only be gained slowly but can be lost rapidly.

2. When yields on one’s bonds increases, or perhaps if one’s credit rating is downgraded, then one is “relegated” to a different section of the market, i.e. bonholders who are willing to take on more risk. This section of the market is inherently more jumpy and volatile.

3. Bondholders are as concerned about the dynamics and sentiment of the bond market (i.e., what capacity the bond issuer will have to roll over debt and how the bonds they buy will be valued after purchase) as they are about the fundamental financial strength of the bond issuers. This has the effect that the bond markets exhibit an endogenous amplifying effect in relation to any perceived weakness of an individual bond.

4. Bond markets have long memories.

Apologies for the tangential nature of this comment..

Ireland is by no means out of the woods, but any respite is welcome. One of the key metrics for rating sovereigns is Interest Payments to General Government Revenues. This would currently suggest a downgrade from Moodys is overdue. It’s possible that Bank bailout costs (/NAMA) will trigger this.

Of the PIIGs, Italy does deserve more attention.

Yup in the same way that they ignored subprime and all the SIVs of the big US banks like Citi and all the accounting shenanigans at Anglo. It is all a matter of confidence. Everything is going swimmingly when one day out of the blue there is a crisis of confidence and bam! We have default.

PS: Shamelessly lifted from Reinhardt and Rogoff. Great book. Advise all Pollyannas to spend some time reading it.

Also, i think all those who have been a bit snarky at the NTMA in recent weeks should be seriously grateful to them for having pre-funded our 2010 requirements by 5bn last year, and for having done 35% of this years issuance by the middle of January. Credit where it is due.

As Eoin says, we live in a relative world. We are relatively better than the other PIIGS, but (thanks to that unfortunate acronym) we are still in the same basket as them. The sovereign bond market is expected to absorb huge issuances this year, and the further we can distance ourselves from the other peripheral EU states the better.

@joe lawlor, There may be the occasional doom monger here, but the site does provide a good counter point to the wholly panglossian outlook from other quarters. As the article says, this is a marathon, not a sprint. Thinking that we have done enough at this early stage because we are putting some daylight between ourselves and the truly profligate would be a mistake.

re NAMA: its off market, its being swapped for (albeit dubiously valued) assets, and its ultimate affect won’t be known for 5-10 yrs. As such, people are largely ignoring it.

re bonds: the current volatility is actually seeing some banks/funds stop holding Greek debt altogether as their VAR models can’t handle the current volatility on such allegedly ’safe’ assets (ie not a trading decision, risk is saying “No”). This obviously creates a further negative push on the price and the liquidity. I expect there’s something similar happening with Portugal right now. In contrast, look at Irish bond and CDs prices in recent months - terribly boring to be honest. As such, for that reason alone its a lot better buy in many peoples eyes. And so again, as Joe Lawlor touched on there, this becomes a virtuous and self-healing cycle.

we live in a relative world. Relative to Greece and Portugal, the markets are deleriously happy with the situation in Ireland.

And, as i previously suggested to you, in all the charts and analysis of Euro-zone soveriengs going round at the moment, I’ve yet to see anyone add the NAMA debt onto our general issuance this year.

@ CoC

I’ve previously highlighted the growing seperation between the PGS and the II in the PIIGS. Ireland and Italy, while clearly still with much work to do, are considered to be on a stable track to consolidation and recovery, while the same can definitely not be said of Greece, and to a lesser extent Spain and Portugal.

Also, a memo sent round Barclays yesterday…

“Please alert your teams not to use the acronym PIIGS in any written communication. Rather, they should spell out the acronym and say: Portugal, Italy, Ireland, Greece and Spain. Research Production globally have been informed to take out any reference to the acronym in question.

Thank you,

Valerie”

Obviously the Club Med has been getting a bit touchy about the PIIGS tag…

May the single positive spin from the article is that if you put your house in order, or at least try, the bond vigilantes will reward you with a with a better rating and thus fund the sovereign at a lower rate. When combined with a credible recapitalisation and clean up of the banks balance sheets, the private sector cost of capital might then fall and the spigot get turned on. Just a random thought.

However, anything “positive” is now deemed non credible to the panapoly of doom mongers, fantacists, nuts, extremists and conspiracy theorists that occassionaly wander into this chet room to communicate their thoughts with the intelligent and the otherwise sane.

I am off to the relative sanity of politics.ie now