Who Holds Irish Government Bonds?

New Central Bank dataset here.

22 replies on “Who Holds Irish Government Bonds?”

“Within the non-bank financial sector, the custodian data assists in gaining further insight into the holdings of the insurance sector. It held €921 million with custodians as at end-February 2014.[4]Regarding Pension Funds, €887 million was held with custodians as at end-February. ”

I have to assume than Irish pension funds hold more than the above referenced €887 million of Ir Govt bonds and that those held by financial institutions are not included. If the full total is only €887 million or less than 1% of govt bonds, then the situation is pretty disgraceful.

PS: I note that the Central Bank is keeping those (PN) Govt bonds in the bottom drawer, out of the equation and safely away from any CB analyst!

Why would it be disgraceful? We need LESS not MORE home bias in bond and other holdings.

We will have to agree to differ on this. I believe we need more home bias, and frankly, if anything less than 50% of the long term tax incentivised savings of the country are being invested outside of it then, at a minimum, the tax incentivisation should be removed.

The old Charleville Park hotel used to have a print of Arther Griffith with the following quote underneath;
‘If we do not support the Irish workhouse, we will have to support the Irish poorhouse’
The intent, imho, is still relevant today, albeit that most investors would scorn the notion that ‘Is i scáth a mhairimid’.

[However, I do not think the figure is 99%, rather an inadequately explained note in the CB report. At least I hope so.]

@ JR

There is no currency risk for parties with Irish liabilities who invest elsewhere in the EZ.

I think the subject of where Irish pension funds invest their money is very pertinent. Most of it is invested in financial assets and as I read in the FT last year

“Risk management has also been (mostly) improved as executives have learnt that often there is no such thing as the intrinsic value of any security – it all depends on liquidity.”

It would probably make more sense to start investing the money in readying the Irish economy for what is coming down the line – paper “assets” are unlikely to hold their value long term once climate and peak oil reality intrudes and assumptions are destroyed but it’s very hard to get that vision thing going with financial services people, in my experience.


[In deference tour knowledge of Gaeilge, I must first correct the above:
‘‘Is i scáth a chéile a mhairimid’. ]

“Most of it is invested in financial assets and as I read in the FT last year ..”

Assuming that means banks etc, if it is true, it is even more alarming.
There appears to be a herd mentality amongst fund managers that makes a mockery of any real rationalisation of the investment being made.
The quarterly or annual bonus doesn’t help a long tern view, never mind the ‘vision thing’.

@ JR

fund management is mostly about consensus these days AFAIK and if the consensus is nuts then…

That was one of the big takeaways from the crisis for me. When the assumptions break down and the assets are suddenly worthless.

Do punters still hold bonds to term or are they regularly flipped like equities ? I presume pension funds are more traditional but what about the others?

I got the company Annual report the other day and had to laugh at the chairman thanking shareholders for their loyalty. Those algorithms have zero respect for that sort of thing.

So, the State owes itself 50 billion, less whatever BoI holds. And will pay premium interest on this ?.


‘Those algorithms have zero respect for that sort of thing.’

Wonder is DOCM an algorithm? She/he/it hits a lot of zeros on those BAU indices.

Must email Mr. Lewis or Bond. Eoin Bond. Seven_of_9 is indisposed.

re: ECB/ BOE Plan for securitisation of ABS:


Thanks for link. To say I was surprised by the ECB/BOE note is an understatement. I wonder have the CB ‘policy makers’ either given up or gone mad. Let me outline a few reasons for this.

The plan seems to be to provide liquidity to the banking system through a back door “shadow banking” system, which will be properly regulated!

1. I understood that the purposes of CBs was to provide liquidity to the banking system. Why is a shadow banking system required?
2. The CBs, that have failed to regulate the existing banking system, and whose new supervision will take in only 180 banks (in the EZ), propose to
properly regulate a shadow banking system!
3. Securitisation, like covered bonds, pulls the rug out from under ordinary depositors and other unsecured creditors, in the event of a bank getting into difficulty. The EZ wide guarantee, that the State will pay, is a kind of ancien regime joke. The relevant states are in no position to bail out anybody, and perhaps the non- relevant states would also be compromised.

4. Banks already struggling for margin would, under this ABS scheme, take their best assets, and borrow money at wholesale rates against them, thereby reducing the margin on their better assets; those that are currently funded through low cost deposits or ultra low cost CB liquidity.

So why proposes such a scheme. Here is a thought.

Having taken billions, possibly trillions, out of the credit system, by deleveraging banks, and realising that such deleveraging has been extremely to the economies, the ECB now want to releverage through a back door shadow banking system.
They dare not admit their mistake and the damage it has done, so this may be a way of somewhat reversing the damage, through a shadow banking system, by letting it rip again. [The BOE role in all this escapes me, except that it would clearly help financial sector activity].

This shadow banking system would be allowed to leverage up to heights that Anglo would not have dreamed of.

It is a very strange proposal, that requires a better rationalization, than the rather technical non rationalization given in the note.

PS. Many thanks for the note. I hope others who are au-fait with banking will comment on it.

@ JR

I think that the questions that you raise are legitimate but that the initiative by the ECB and the BOE has to be set in the context established by these two contributions, the first with regard to solving the problem of the lack of “safe” assets as suggested by a group of economists and the second the recent speech by member of the Executive Board and ECB Chief Economist, Peter Praet which sets out the general context.



The way that I read it is that, the Big Bang solution being politically out of the question, but the problem remaining as big as ever it was and growing, a toe is being put in the water in relation to ABS.

The fact that the BOE is involved underlines the fact that the problem is not confined to the Euro Area.

@ JR

The debate in the matter is also not exactly new as this Alphaville coverage from 2012 illustrates.


Incidentally, the Peter Praet speech is the first comprehensive and structured statement of the economic – and political – analysis that is underpinning, if not driving, the policy decisions that are actually being taken that I have read. That it coincides with the view from Berlin should not prevent consideration of it on its own merits.

The general point is that, at the the present level of European political integration, governments remain responsible for most of the decisions that are required and it would be contrary to democratic legitimacy and counter-productive to act on any other basis. The parlous state of the health sector in Ireland is a good example (as set out by CMc in this morning’s Sindo).


For anyone who hasn’t noticed the AIB quote suggests active punters are discounting >50bn not <11bn.

What was it exactly the Finance minister said about middle ranking ECB officials?

Nassim Taleb’s Black Swan has arrived! Has the new “data set” taken into account Ukraine and in particular Donetsk and Kharkiv? The elephant trotting around the room? As usual our lot will be the last to find out. Osborne has already warned The City to brace themselves. Our politicians and RTE are still basking in the warm afterglow of Buckingham Palace. They are still posting all the ridiculous amount of selfies they took over there on Twitter & FB. Meanwhile, the lurking dangers are no longer lurking they are now looming!

@John Joe Nevin

Hang in there.

‘In the 103-year history of the Irish Amateur Boxing Association, [John Joe Nevin] is the only boxer – besides Katie Taylor – to medal at all of the major championships, Olympic (silver), World (bronze), European (gold), and European Union (gold). And the only boxer, besides Taylor, to make it to No 1 in the International Boxing Association world rankings.’



It’s debatable whether the net impact of Irish pension institutions is really a tax incentive in favour of pension fund saving. While the tax arrangements have an immediate negative impact on government tax revenues, the full-cycle benefit to those investing in pensions is much less and could be negative relative to other types of investment.

First, taxation is deferred, not cancelled. While funds are not taxed on the way into the pension fund, they are taxed on the way out. Taxes applicable to taking the funds out are steeper now than they used to be.

Second, the government takes a slice out of accumulated pension funds whenever that takes its fancy, and there is a meaningful possibility of complete expropriation compensated with a much less valuable benefit.

Third, the way the pensions industry is regulated by the government seems engineered to take an unjustifiably substantial regular slice out of pension funds to the benefit of brokers and the funds industry. Even if this is not formally a tax, it is a major disbenefit to people with pension funds that is equivalent to the combination of a tax on pension holders and subsidy to the financial services sector.


re: I take the points you make re the tax advantages of pension funds. In particular the fact that private sector pension funds are now to government coffers, what the friends of CRC was to the executives of the CRC; a slush fund to dip into, to keep their own salaries and benefits at the level they believe they are “entitled” to.

That said, my principle point relates to to the exporting of badly needed investment, through the conduit of pension funds.

[The “entitled” quote from one government minister and also from a long since retired Minister, both women as it happens!]

@DOCM / Grumpy

Thanks for links. Point taken re parlous state of economy.

This was further underlined in the SBP by Cliff Taylor yesterday.

His article indicates that NAMA are being asked to see if they can “accelerate” asset sales, the purpose being to repay AIB bonds before the date on the tin.

So NAMA assets will have to be dumped at yields of ?7%+, in order to put cash on the AIB balance sheet; an AIB that is full owned by a government that can borrow at 3%.

The differential interest rate (cost) will be labelled success at asset disposal, rather than yet further back-door support for AIB.
Chris Johns, Ir Times should note the SBP article, in calculating how much support the banks received.

Is it the same group who hold Irish government commercial property leases?.

A Preliminary Report on the Source of Ireland’s Banking Crisis ” by Klaus Regling and Max Watson-page 6:
“This was a plain vanilla property bubble,compounded by exceptional concentrations of lending to property-and notably commercial property”

When the commercial property bubble burst it bankrupted the entire Irish banking sector,which in turn bankrupted the sovereign.

Reckless Irish banks lent billions against the feudal leases i.e. upward-only rent reviews tied to long leases,not aganist the properties themselves ,and created the greatest commercial property bubble in the history of mankind.

The reason Ireland had these ruinous leases was because the sovereign signed them.
All Haughey’s bagmen are sovereign landlords.

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