“Central Bank Governor Patrick Honohan said he believes the spread between Irish bonds and benchmark German bunds will ease from current “crisis” rates to the more sustainable levels seen in April of this year, if the Government’s fiscal policies are implemented.”
“”Much of the reason for the slow return in confidence [sic] lies in the parallel weakness of the fiscal situation,” he said.”[Irish Times, 10/11/10]
Where’s the evidence?
“It is an urgent and immediate priority to reinforce international market confidence in our ability and commitment to restore our banking system to health and to secure the long-term sustainability of our fiscal position.” [Brian Lenihan, 30/09/10]
Below is a graph attempting to chart ‘the market’s’ reaction to government policy over the last 3 years. If anyone has access to the raw data used to create the bond yield graph (GIGB10YR:IND) please send it our way.
Charting government policy vs market reaction [click image to zoom]
What happened today? What was all the noise about government bonds, spreads, cats in bins. This is what happened:
The graph shows the 10-year bond yield for Irish government bonds (essentially the cost of borrowing), which looks fairly dramatic, until you look at the same data over a longer time frame, in this case the last 3 years:
Data provided by Bloomberg.
MEDIABITE 