Irish bonds and euro trade nervously

Volatility continued to hit the Irish bond market and the euro, as investors waited nervously for news on whether Greece and its creditors would fall short in negotiations over its repayments to the IMF.

However, analysts said the euro was likely in the longer term to weaken against sterling, good news for Irish-based exporters who have benefited from the rise of sterling, which makes their goods and services sold into Britain more competitive.

Ryan McGrath, senior bond trader at Cantor Fitzgerald Ireland, said that though in absolute terms Irish 10-year yields have risen sharply they were keeping pace with core eurozone interest rates such as those of Germany and France.

“Yields have been going up clearly because there has been a huge amount of volatility in the market. Greece and lack of liquidity are the main reasons… In absolute terms, Irish 10-year bonds are trading at 1.56% — up from about 1.20% at the start of the week,” he said.

The euro has fluctuated because of the Greek crisis. However, Mr McGrath predicted that the differentials between rates in the US and eurozone would likely ensure the euro remains weak.

He said he still expected the euro to soften against sterling in the long term. “It could go to the low 70 cent.”

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