Tuesday, November 1, 2011

Bonds and loose change

Tomorrow sees the repayment of about $1,000,000,000 of unguaranteed bonds owed by the rump of Anglo. This is the money that Dana was mentioning at every opportunity during the last few presidential debates. This equates to about €730,000,000 or in some more manageable terms, heading towards twice the total spend on Special Needs Assistants for a full year or about 20% of the cutbacks that are going to be announced in the upcoming budget.

The argument for paying goes along the lines of this: the EU/IMF deal has us going back to the market next year. If we don't pay back this bond the reputational damage done to Ireland will so great that we won't be able to afford to go back to the market at a reasonable rate. Therefore we must pay back these bonds at face value to have credit available to us in the future. Sounds reasonable, doesn't it?

Except it isn't. These are unguaranteed bonds that have been traded multiple times since issue with the current owners probably paying somewhere around 10c in the euro to mop them up. So the original lenders have already taken losses on these bonds. The current owners are hedge funds and the like who are looking to make a killing when Ireland Inc foolishly pays back face value on bonds that are effectively junk.

Of course I am just guessing that these bonds are held by hedge funds as nobody will actually say who holds these instruments. We have no idea who the owners are and whether they are the same institutions who will be our lenders in the bond market in the future. However, the cloak of secrecy surrounding their identity suggests to me that they are not the same people.

I'm also getting sick of Ireland trying to be the best boy in the class while Greece gets 50% hair cuts, second bailouts and a referendum on their financial future. while I wouldn't suggest becoming the rebellious punk that is Greece, we could at least ruffle our hair once in a while, open the top button on our shirt or wear mismatching socks. We still are, despite the best efforts of Fianna Fáil, a sovereign nation and should play that card once in a while. We have made some progress on the reduced interest rates, you just get the feeling that we're still sucking up to teacher in the hopes that someone else will get into trouble before us.

Speaking of trouble, I really can't believe that €3.6B was mislaid in a transfer between two state agencies, namely NTMA and the Housing Finance Agency. How someone doesn't immediately notice that rather than going up by €3.6B that their overall balance went down by the same amount is outrageous. I would certainly know if my wages were taken out of my current account on the 20th of every month rather than deposited. It makes you wonder what sort of quality control and monthly account reconciliation is going on over at the HFA.

PS - now that #aras11 is over I'll be getting back into more regular blogging. Huzzah say the masses!


  1. I believe they were down to 52c in the euro but that's all but yes. I emailed my government TDs and told them how disgusted I was with this repayment.




    have more info.

    Has it been repayed? I assume so but don't see any mention anywhere.

  2. It was due for repayment today at midday. Sinn Fein and the technical group tried to have a motion voted on in the Dail to have the repayment suspended but it was defeated.

    Nama Wine Lake is a great resource but the changes to Google Reader in the last few days have kept me off the blog reading scene :P