Davy Research |
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Monthly debt digest
Seismic shift?
12 July 2012
Donal O'Mahony |
Eurozone leaders delivering positive surprises towards economic and financial stabilisation, albeit execution risks still casting a long shadow over leery bond markets
Key progress in breaking adverse sovereign/banking nexus via direct bank recapitalisations, consequent of agreed establishment of pan-European banking supervisory body by end-2012.
EFSF/ESM to act in more "flexible and efficient manner", with bond market interventions on foot of MOU conditions, not formal bailout terms; preferred creditor status slowly eroding.
Medium-term roadmap "Towards a Genuine EMU" a querulous work in progress, but evident commitment to more rather than less Europe a timely riposte to the "break-up" brigade.
Irish sovereign an unambiguous beneficiary of the end-June Summit, although some needless disappointment risked by initial expectations mismanagement
Commitment to boost sustainability of "well-performing" Irish adjustment programme endorsing the government's quest for a re-engineering of legacy banking sector stabilisation policies.
Restructuring of IBRC promissory note financing finally beckons, along with equity disposals in the viable banks, the latter perhaps preceded by a further transference of loss-making assets.
Associated ESM involvement in Irish banks to reduce debt burdens for the Irish sovereign, but not as substantially as some initial estimates (€20-30bn) pre-suppose.
Successful relaunch of Irish T-bill programme indicative of evolving investor sentiment shift; further debt exchanges now probable, while likelihood grows of outright bond issuance before year-end
Ireland's first (and minor) return to market financing since Q3 2010 of more symbolic than practical import, albeit weight of overseas interest totemic of much-improved investor sentiment.
NTMA in opportunistic mode for the remainder of 2012, most immediately via debt-exchange re-runs, but with a longer-dated bond syndication no forlorn prospect if calmer conditions extend.