Author: Karl Whelan

Anglo Bond Note from DoF

The talking point about repayment of Anglo bonds not costing the taxpayer any money had received a sufficiently wide rollout that it was clear that this was something government politicians were being told was a good thing to say. Via Constantin, here is a note from the Department of Finance apparently distributed to government TDs.

The note tells the politicians that “It is important to state that the redemption of the bond will be made by the IBRC. It will not be funded by the Exchequer.”

Is it really important to state that? Why? So someone sitting at home might think that we’ve stumbled upon some money that eases the burden of paying the bonds, even though the US assets were being sold at a loss? So they might forget that the alternative to using the money to pay off the bonds is to return it to the exchequer?

Anglo has lost all of its equity capital multiple times over and has been continually recapitalised by the state. Money is fungible. All resources being used to pay off the bonds are state resources.

This talking point doesn’t work. Time to give it a rest. Please.

Thoughts on a Greek Referendum

I have posted some thoughts on the potential Greek referendum over at the IIEA’s blog.

State Gains from “Error”

Fairly amazing story

The general Government debt is to be written down by 2.3 per cent, or €3.6 billion, following the detection of an accounting error.

The Department of Finance said the National Treasury Management Agency (NTMA) had notified it of a double count brought about a change in its relationship with the Housing Finance Authority.

Does this mean we can cancel the €3.6 billion budgetary adjustment? (Just kidding).  Now if only we could correct the “error” of supplying the IBRC with €31 billion in promissory notes, we’d be saved.

Greek Referendum

Papandreou says

“We have faith in our citizens, we believe in their judgment and therefore in their decision,” Mr Papandreou said after rejecting a call for early elections by some socialist politicians. “All the country’s political forces should support the [bail-out] agreement. The citizens will do the same once they are fully informed.”

Does he believe this? What are the implications for the euro?

EFSF Scales Back Irish Bond Issue

This is hardly confidence-inspiring news. EFSF is supposed to save the Eurozone and offer Ireland cheap and long-term funding. What if the markets decide not to play ball and decline to offer the facility sufficient funding at low rates or long maturities?

The eurozone rescue fund has scaled back a planned bond issue designed to finance the bail-out of Ireland amid uncertainty over the level of demand.

The offering will provide a key test of investor sentiment after the announcement last week of new plans to tackle the eurozone debt crisis.

The bond from the European Financial Stability Facility will only target €3bn, instead of €5bn, and will be in 10-year bonds rather than a 15-year maturity because of worries over demand. A 10-year bond is more likely to attract interest from Asian central banks than a longer maturity …

Already delayed from last week, EFSF officials decided to price this week because market conditions could deteriorate if they held off any longer.

The bond is expected to price at yields of about 3.30 per cent, and about 130 basis points over Germany, the European market benchmark. This is a big mark-up since the middle of September when existing 10-year EFSF bonds were trading around 2.60 per cent and only 70bp over Germany.

Not good.

Update: Eoin points us to an Oct 13 statement indicating they intended a €3 billion issue. Thanks Eoin. It appears the FT over-egged this one. They’re probably right about the delay, the reduced maturity and the higher yield