- Oct 26, 2006
BUSINESS WORLD - Irish bonds face meltdown after ClearnetIrish sovereign debt trading faces meltdown today after London-based transaction clearing house, LCH Clearnet, doubled its margin requirement on Irish Government bonds to cover perceived increased risks.
It raised its margin deposit requirement by 15pc to 30pc of net positions, citing higher Irish yields over German benchmarks.
Irish Bonds Decline as LCH Raises Margin Requirement Again; Bunds Advance - BloombergIrish bonds fell relative to benchmark German bunds as LCH Clearnet Ltd. said its clients must pay a larger deposit to trade the nations securities after yields soared.
The drop pushed Irish 10-year yields up for a second day. LCH, the worlds second-biggest fixed-income clearing house, raised the extra margin requirement for Irish bond trading in the repurchase market to 30 percent of net positions. Irish bonds stayed lower after Finance Minister Brian Lenihan said talks with the European Commission, European Central Bank and International Monetary Fund on potential aid for the countrys banks will start tomorrow. German bonds climbed.
The margin requirement increase isnt good for Irish bonds, but it makes an aid deal more likely, said Charles Diebel, head of market strategy at Lloyds TSB Corporate Bank in London. It seems pretty inevitable that some kind of deal will be done. Its just a question of how and what the details are.
The game is over now.