German 30 year bond yields hit two month high
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Irish Examiner
14 hours ago
- Irish Examiner
One-time bond pariahs like Ireland now go neck and neck with Germany, France
A decade and a half ago, Guillermo Felices was helping clients navigate Europe's sovereign debt crisis. Now, he's extolling the bonds once at the centre of that storm. Italy, Spain, Ireland, Portugal and Greece, which nearly collapsed under the burden of their debt in 2011, have since transformed into top picks for firms like PGIM Fixed Income, where Felices works as a London-based investment strategist. His recommendations are emblematic of the historic shift that's taken place in the region's debt-market hierarchy. The recovery in the nations on Europe's periphery has been years in the making and as investors shy away from President Donald Trump's policy making, their bonds are increasingly being seen as healthy alternatives to the debt of Europe's biggest economies. Spanish, Greek and Portuguese bonds now all yield less than France. Italy is on course to outperform Germany and France for the fourth year in a row on a total returns basis — matching the longest winning streak on record. 'Post-crisis, the story was always that Europe is going to be difficult to solve,' Felices said, pointing to its history of sluggish growth, excessive public spending and squabbling among member states. 'This is less the case now, especially in terms of fiscal profligacy, while the US is more unorthodox.' US Treasuries have been buffeted this year, most notably in April when Trump unveiled a package of aggressive trade tariffs. Worries over the US fiscal outlook have also flared up. The appeal of the peripheral bonds, meanwhile, is down to a post-pandemic economic recovery that outstripped the gains in the region's economic powerhouses of Germany and France. Spain is a particular bright spot, and is expected to grow around 2.5% this year, more than double the pace of the wider bloc. Investors' exposure to the nations on Europe's fringes remains near the highest levels seen in the past five years, according to a monthly Bank of America survey. Another key turning point came in March, when Germany abandoned decades of fiscal austerity and vowed to plow billions of euros into defense and infrastructure. While that's seen as a vital catalyst for EU growth, the coming deluge of German bonds has made some investors cautious and damped prices for the nation's debt. 'We prefer countries with strong growth and which haven't committed to raising defense spending as much as Germany,' said Niall Scanlon, fixed income portfolio manager at Mediolanum International Funds Limited. Spain is his 'standout pick,' though he says he has also favored Italy this year. Then there's France, once considered a proxy for Germany in terms of its financial heft, but now a no-go for many bond funds. Investor sentiment soured last year after unbridled public spending left it with the largest deficit in the euro area. Attempts by the government to pass its 2026 budget in the coming months may trigger a fresh bout of volatility. As a result, the difference in borrowing costs between France and Italy has shrunk: investors demand just 12 basis points of extra yield to lend to Italy for 10 years rather than France — the smallest amount in two decades. 'We prefer Italy and Spain over France and Germany,' said Sachin Gupta, portfolio manager at bond giant Pacific Investment Management Co. The periphery's outperformance 'can continue, even after having come a long way,' he added. In a speech in June, European Central Bank official Philip Lane pointed to the relative stability of euro-area bonds this year, even as other debt markets saw significant price swings. That's likely down to factors including inflows from domestic and global investors as they reduced exposure to US assets, as well as a 'shared commitment' to fiscal responsibility across the bloc, Lane said. To be sure, peripheral bonds have already rallied so much that potential returns aren't as attractive as they once were. Greece is a case in point — less than three years ago its 10-year bonds yielded more than 5%. That's since declined to about 3.30%. 'It is undeniable that the heavy lifting has been done,' said Gareth Hill, a senior fund manager at Royal London Asset Management Ltd. And there's still some reticence among US investors to venture into European sovereign markets beyond German bonds, which retain their status as the region's haven asset. Ales Koutny, head of international rates at Vanguard, said that while US demand has picked up, bunds have taken 'the lion's share' of inflows. Still, it's hard to make a case that the periphery nations will fall back into the slow lane, unless there's a fresh economic crisis or sharp lapse in budgetary discipline, according to Royal London's Hill. Kristina Hooper, chief market strategist for Man Group Plc, argues that —with the appropriate vetting — there are plenty of opportunities to be found beyond the traditional core. 'It is the time to diversify away, at least modestly, from the US,' Hooper said from New York. Peripheral countries 'are doing well, and their bonds look far more attractive than they used to,' she said. Bloomberg
Irish Examiner
3 days ago
- Irish Examiner
Irish Examiner view: Hold the gloating in an uncertain world
Search engines will offer dozens of alternatives to that German phrase which describes the malicious enjoyment taken through the misfortunes of others. But nothing quite catches it like the original: Schadenfreude. It's a compound word which seems particularly appropriate for the gloating, social media-driven 21st century, although linguists will point out it has existed for at least 130 years, and perhaps longer. It has been ubiquitous this week, as various storylines have emerged from the latest round of tariff bingo. There are those who have wondered why so many countries have been able to get away with playing both ends against the middle when it comes to their purchase of cheaper Russian oil, while the rest of us take the hit for supporting Ukraine in our pockets and living standards. China is one of those, but it doesn't pretend to be in favour of Kyiv anyway. Turkey is another. So is Brazil, and the United Arab Emirates. Even some EU members remain enthusiastic consumers. And then, of course, there is Narendra Modi's India, the subject of US president Donald Trump's ire this week. Before Vladimir Putin's illegal invasion, India purchased about 68,000 barrels of oil per day. Last year, that had risen to 2.3m barrels, roughly 40% of its needs. Indeed he has gone further, alleging that New Delhi is profiteering from sanctions avoidance. On Truth Social, Mr Trump wrote: 'India is not only buying massive amounts of Russian oil, they are then, for much of the oil purchased, selling it on the open market for big profits. They don't care how many people in Ukraine are being killed by the Russian war machine. Because of this, I will be substantially raising the tariff paid by India to the USA. There is zero evidence that sanctions are impeding the Russian war effort — bear in mind that the EU has introduced 18 different packages to increase the pressure on Moscow — and the reality is that a significant proportion of the oil that India is purchasing, legitimately, at capped prices, is being refined there and then re-exported back to Europe. While the relationship between Washington and the sub-continent may be regarded as collateral damage in the White House, such gestures must properly be viewed in Shakespearean terms as being 'full of sound and fury, signifying nothing'. It may well provide some mood music for Russia negotiator — and real estate developer — Steve Witkoff during his talks about talks with the Kremlin. But for threats to carry real weight, they must include China, the principal purchaser of Russian oil. This is wholly unlikely to happen. US imports from China are worth five times as much as those from India. Many of them are consumer goods such as toys, clothes, and electronics which will drive the inflation that Trump is pledged to suppress. The last time such stringent tariff threats were made, it presaged a suspension of trade between the world's two largest economies, something which would herald an international commercial crisis. Sitting here on the edge of Europe, Ireland might consider that a preoccupation with Ukraine will at least put the vexed subject of pharmaceutical tariffs on a longer finger. But this is cold comfort. Attention may be elsewhere for now. But it will only be a short time before the basilisk stare turns back in this direction. And others might then be able to find some consolation in our own travails. Magic moment inspired Jessie Buckley Many of our readers will be familiar with the work of Jessie Buckley, proud daughter of Killarney, and an actor whose progress has been reported in the pages of the Irish Examiner for more than two decades. Jessie Buckley's next big screen appearance will be in 'Hamnet', a fictional depiction of the life of William Shakespeare and his wife. Picture: Emma McIntyre/Getty At a time when we are blessed with some of the world's leading performers — Fiona Shaw, Ruth Nega, Denise Gough, Saoirse Ronan, and a host of others — there's a sense that we are about to commence a year when Buckley might be elevated to the head of that pantheon in the public consciousness. Certainly The New York Times thinks so, this week dedicating nearly 4,000 words of interview to her under the heading 'Jessie Buckley Goes Where Few Actresses Dare'. This in-depth profile is published ahead of her starring role this autumn in Hamnet, based on the 2020 bestseller by the Irish writer Maggie O'Farrell. This account, already converted to a resoundingly successful stage play, is a fictional depiction of the life of William Shakespeare and his wife Agnes following the death from the plague of their 11-year-old son. The Bard of Avon is portrayed by Ireland's current go-to actor, Paul Mescal. Agnes is a herbalist who is reputed to be the daughter of a forest witch. Buckley, says the NYT, has earned the reputation 'for playing complicated roles with devastating power.' While there is plenty to digest in a complex profile there is a reference to provide inspiration for any parent. Brought up in a musical family which didn't possess a TV, she would "play dress-up at home and act in school musicals'. Being taken backstage by her mother after a local production of Jesus Christ Superstar was, she says, 'the first time I saw the magic'. But not, thankfully, the last. For her, or for us. What's your view on this issue? You can tell us here Sports injuries There was a moment in the final rugby Test between Australia and the Lions when the stadium fell silent. It wasn't an observation of the normal courtesies which attend upon a penalty kicker's attempt at conversion. When more than 80,000 people are that quiet, it can be a cause for worry. In this case, it was the moments that followed the collision between the head of the doughty Ireland lock James Ryan and the knee of the Wallabies man-mountain Will Skelton. Ryan was stretchered off and, as we now know, regained consciousness sufficiently to provide a thumbs-up as he left the pitch on a stretcher. However, a match which produced three failed head injury assessments, plus that concussion, reignited the debate about the safety of high-impact sports such as rugby, boxing, Gaelic football, hurling, and NFL. This was taken forward in the Irish Examiner when Colin Doherty, head of the School of Medicine in Trinity College Dublin and a neurologist with a special interest in the subject, challenged certain preconceptions about those who are criticised for worrying about what happens to athletes who suffer repeated blows during the natural course of their sport. He wrote that he could hear the chorus of contact-sport supporters accusing him of wishing to ban contact sports or failing to see the important mental and physical benefits of taking part in sport. 'Nothing could be further from the truth,' he said. 'The charge that researchers like me are ultimately out to ban the sport is akin to saying that I want to ban driving because there are so many recorded deaths on the road.' The paucity of the critics' argument is such that it bears repetition. Calls for a proper, independently-funded research programme on risk — supported by mandatory screening for all players — seem reasonable. Requiring all coaches at all levels to undergo training in concussion awareness is a sensible precaution. What is there to argue about? In the case of the groundbreaking legal action involving more than 1,000 players from rugby league and rugby union, there seems to be plenty at dispute. Last month, the judge presiding over the lawsuits said the solicitor acting on behalf of the claimants had been under a 'misapprehension' about his responsibilities and that 'he seems to have a problem with the English language'. He also said that the firm involved had failed to disclose material to the defendants — World Rugby, the Rugby Football Union, the Welsh Rugby Union, and Rugby Football League. Senior master Jeremy Cook, hearing that only a minority of the players have received a medical diagnosis, said there had been enough delay. The cases needed resolving, 'and the sooner the better'. That is true, but the full hearings are unlikely to commence before 2026. There is no reason, in the meantime, for sport to delay an improvement in precautionary practices and protocols.
Irish Post
3 days ago
- Irish Post
Irish savers are getting some of the lowest returns in the EU
IRISH people are saving more than ever, with bank deposits reaching a high of over €160 billion at the start of the year. However, savers in Ireland are earning some of the lowest returns in the EU, with many people missing out on potential interest income due to persistently poor rates on both instant-access and fixed-term deposits. Recent analysis by Raisin Bank highlights just how uncompetitive Ireland's savings landscape is: the average return on overnight deposit accounts in Ireland over the past year was just 0.13 percent. German savers, by comparison, earned an average of 0.55 percent. On term deposits, which offer higher interest in exchange for locking away funds, Irish savers still fall behind other European countries, receiving an average return of 2.44 percent, compared to 3.06 percent in Italy. Over a ten-year period, the analysis shows the divide only grows starker. Irish people saw the lowest year-on-year returns of all countries surveyed in the report, averaging just 0.62 percent. The Central Bank estimates that Irish saving account holders missed out on €800 million in deposit interest in the last year alone. A large part of the problem lies in the structure of Ireland's banking sector. There are only a few banks to choose from and relatively little customer switching between institutions or account types. This means banks have little reason to offer competitive rates. Many people continue to keep their money in overnight accounts out of habit or a sense of security, despite better options being available elsewhere. According to Raisin, around nine out of every ten euro saved in Ireland is kept in these low-yield accounts. This cautious approach could stem from the global financial crisis. At the time bank competed for deposits, and savers were rewarded with attractive returns. However, since the crash, as the European Central Bank maintained a policy of ultra-low and even negative interest rates, the incentive to move money all but vanished. A rise in inflation since the global pandemic and geopolitical problems has also complicated matters. Even when interest is earned, it often fails to outpace inflation, resulting in a negative real return. The value of money sitting in a savings account may be quietly eroding over time. Ireland's 33 percent Deposit Interest Retention Tax (DIRT) worsens the picture, reducing the net return on interest earned. Unlike in Britain, Irish savers do not have access to tax-free options like ISAs, limiting their ability to build wealth in a tax-efficient way. The situation is especially difficult for younger people. High housing costs and rising living expenses mean that many can only save for short-term goals, like a deposit for a home, leaving little flexibility to seek out higher-yield, longer-term options. Meanwhile, older savers, who have less incentive to change, are leaving billions in low-return accounts. Banks have long relied on this to maintain their deposit base without offering competitive rates. Although fintech startups such as Revolut and N26 have entered the market with more appealing features and interest rates, concerns around fraud, customer service and digital access still intimidate some people. Traditional banks have also become targets for sophisticated scams, making some savers wary of exploring unfamiliar options. Credit unions also face deposit limits and regulatory hurdles that make it difficult for them to offer meaningful competition. Government savings products, like prize bonds, remain popular with a segment of savers, largely due to perceptions of safety. However, their real-world performance is mixed. In 2023, prize bond sales dropped significantly while redemptions rose, and critics argue that the lack of guaranteed returns and declining inflation-adjusted value make them an outdated choice. Despite strong savings among the Irish public, the system in which they operate does little to reward it. High deposit levels are masking deeper inefficiencies in the market, low competition, insufficient innovation, poor real returns and an over-reliance on traditional financial habits. In 'Low and Slow: Irish household deposit preferences and their response to the changing interest rate environment', Economist Tiernan Heffernan notes that although the European Central Bank's (ECB) reference interest rate hikes since July 2022 'did attract Irish households to place their deposits in longer-term deposit accounts to some extent, they still fall far behind the euro area average in this respect.' Irish households now hold the highest proportion of their deposits in overnight accounts of any euro area country. This cautious approach has come at a significant cost. While higher interest rates have slowly begun to influence saving behaviours, the shift has been modest. For much of the past decade, interest rates were so low that there was little difference between overnight and term deposit returns, offering households little incentive to lock away their savings. Although Irish term deposit rates historically trailed those in the euro area, 'this is not the case in the most recent data,' yet the habit persists. Part of the explanation may lie in Irish households' gradual response to change. 'Irish households have been slower than their euro area counterparts to respond to rising term deposit rates,' Heffernan writes. However, some savers have started turning to neobanks, attracted by 'higher rates on deposits and additional online services'. With inflation eating into savings and banks prioritising profitability over customer value, the current model benefits banks far more than ordinary people. See More: Banking, Central Bank Of Ireland, DIRT, ECB, Saving
