Spot the odd one out in this bevy of Irish credit spreads on Monday — chart and data courtesy of Markit:
That’ll be Anglo Irish Bank CDS taking off towards 700bps, leaving both peers and sovereign behind — and opening another exteeeended issue in Irish banking.
Anglo Irish was on the agenda during a Brussels visit by Ireland’s finance minister Brian Lenihan on Monday — but there’s been some confusion on what exactly he wants to talk about.
The Irish Independent reported that Lenihan wants the EU to approve a ten-year winding down of Anglo Irish, based on the idea that five years is too risky for the taxpayer, and the realisation that a ‘good bank’ probably can’t be carved from Anglo Irish’s remains.
Not so, said the Irish finance ministry, according to Reuters – both options are on the table, or, well, at least until the EU decides at the end of month.
A month which sees huge amounts of Irish bank refinancing, and the end of certain government credit guarantees. A month which sees a fair bit of bond issuance by indebted governments like Ireland, too.
Not a month to keep credit markets waiting, in short. Which, as Markit’s Lisa Pollack pointed out on Monday, is more or less what they appear to have done.
Using DTCC data which tries to strip CDS trading down to what it calls genuine risk transfer activity (two parties begin a new trade or end an old one, for example, or transfer a trade to a third party), Pollack has found that this activity has ridden back somewhat:
Although as Pollack notes, using Markit data:
Our own data show that the average bid/ask for banks has widened out over the last month, further indicating the uncertainty around these names and Anglo Irish in particular.
When the new market activity data are published (on Wednesday) we should be able to get a better indication of whether participants are still sitting on the sidelines or not. With a bid/ask that wide, you’d have to be pretty convinced one way or the other.
Related link:
Mmm, Irish yield stew - FT Alphaville