Am I the only one who is fearful on what is happening here? It’s pretty clear that Irish banks are loading up on Irish government debt, either through swaps like this, or by buying bonds on the secondary market. Also, I find it hard to imagine that it’s the banks themselves that are pushing for this; so could it be political interference that’s driving this agenda? Another worry is about how this will affect capital ratio’s at our banks. If these bonds are marked to market - surely we have just ripped another multi-billion Euro hole in their balance sheets? With debt to GDP north of 100%, the government capacity to absorb these losses is limited, likewise for the private sector.
I think yogan and others have speculated that the position of the government is merely to not be the first country to default. Surely that is no longer the case? The current course of action appears to be an all-in bet with bank recapitalisation funds that Ireland will not default. The rash of media announcements and government statements that we are back in the bond market, seems to suggest we are making an all-out, and concerted attempt to persuade the international markets that we are a solvent, creditworthy prospect. The problem is, that there is only so much bank capital and it can’t even come close to covering the mountain of debt that we need to refinance over the next few years.
Even now, despite all the ‘crisis’ talk, having sovs on your balance sheet is the least capital intensive asset class, mark to market or not. If anything the bankers could rapidly gorge themselves on these deals over the next while. Money for auld rope, no risk, heck it’s like 2006 on the streets of Ballsbridge and Mespil road tonight.
Capital rules including the stress tests are stuck in 2004. Back when greece was known only for ruining football games and bringing the olympics home. For public safety at this stage, that just might be a good thing.
I was on a train recently with a Labour senator - he was openly talking to someone saying that this was the government policy - wait for the big boys to sort everything out and just keep quiet in the meantime. I was surprised that it seemed so “of course”.
The Irish banks would have bought the original bonds back in the good old days of 2007 and 2008 when the Irish state was borrowing more and more as tax revenues imploded and they were begging for the guarantee.
Who can take seriously the likes of PTSB, BOI and AIB or worse still IBRC “swapping” government paper and publicly proclaim “Ireland is back in the bond market again !”. This is such an obviously self-dealing transaction it looks more like a sign of weakness than of strength.
It reminds me of the Cluid transaction buying those overpriced apartments in Sandyford.
All this does is make them look more desperate to the hedge fund guys.