Assuming there is money there to pay you when they fall due, hence the premium rising as it looks less likely there will be cash there to payout?
Bond yields should be a straight line. For example the German Bond yield goes from circa 1.5% for a 1 year straight back to circa 2.5% for a ten year.
Our bond yield has a bell shaped curve (as does Greece & Portugals) due to the fact that the markets see our 2014-2016 bonds as the most likely to be affected in a default. The stuff shorter than that is covered by the bailout.
The thinking is at the moment that we’ll need a 40% default on our bonds (pay back 60c). All the longer dated stuff are therefore pricing in a 35-40c discount. This is where the curve gets messed up as the 2014 will have a higher yield than 2020. For example to make back the 40c on the 2014 bond in three years gives you a return of 13.3% + Coupon of 5% gives an annual return of 18% circa the yield at the moment. The return on a 10 year is 4% a year + Coupon of 5%.
This is a simplistic calculation as it doesn’t take into account the fact that your getting paid a coupon on say €100,000 which you bought for €60,000 so 5% on a bond you buy at a discout would give you an annual return of 8.333% just from the coupon.
if I can paraphrase JG, yes.
i’m guessing you can answer this for me
pretty sure Karl Whelan answered it on irisheconomy but can’t find it
is 18% quoted for 2 year paper an ROI of 9% per annum, or 6.5% per annum (assuming 5% coupon) plus the 5% coupon?
The yield at the minute is 17.438. Thats a price of circa 82.50.
Lets make it easier for explanation sake and say it matures in exactly 2 years and is priced at 80c.
Formula for is (100/Cost Price *Coupon) + (100-Cost Price)/Number of Years
Therefore (100/80)*5% = 6.25% + 10% Capital Gain a year giving you 16.25%.
Its higher in this case because there is less than two years meaning the capital appreciation is quicker.
thank you very much.
nerd that i am, formulas will do nicely.
For completeness for the divided by years remaining part, interest in general on Irish Bonds is calculated on a 365 day basis but can be on a 360 basis. 
Tis grand.
Ireland is on track and meeting its targets as part of the EU/IMF bailout, the ‘Troika’ have told the Government.
following on from Sid’s thought-provoking posts of late, here’s some sober reading from the adriatic
given the source, I’m sure there’s a lot more of this on the way
how the hell did it come to this?
European Project my hole.
[b]
‘I’ve lost about a stone in weight – that’s my contribution to Ireland’s cause’[/b]
Diarmuid O’Flynn, centre, on one of the weekly marches in Ballyhea.
IRISH EXAMINER HURLING writer Diarmuid O’Flynn has relaunched his efforts to rally opposition to the EU/IMF bailout by embarking on a seven-day “bread and water” fast.
Enraged by the colossal sums which the Irish people are handing over to European bondholders each month, O’Flynn has become more and more consumed by a protest movement which started off with small weekly marches in his native Ballyhea, Co Cork.
When those efforts failed to grab the public’s attention, he stepped up his action in June, setting off on a three-day run from Cork to Dublin to deliver an anti-bondholder petition to the government.
Those protests were met with widespread, if unsurprising, indifference as well, O’Flynn told TheScore.ie this afternoon. But that hasn’t stopped him from starting the fast which will be his “last throw of the dice.”
Since last Sunday, O’Flynn has had nothing to eat and drink but bread and water, a symbol of “the penal condition to which the ECB will have us reduced should we continue […] redeeming in full all the current failed bank bonds, as directed by them.”
Though he has no formal economic training, he has spent a huge amount of his free time trying to educate himself in the ins and outs of Ireland’s financial mess.
“I’ve spent every waking moment on this for the last few months,” he said. “Everyone around me has suffered. My social life, my hobbies, my family, they’ve all been neglected.”
His latest campaign comes at a particularly important time for the country’s finances. According to his own estimates, Ireland owes €444m in bank bonds to be repaid this month, with 10 times that amount – over €4bn – due at the end of September.
“This is happening at a time when the government had to close an autistic school in Dublin because they couldn’t find €100,000 in funding.
This is human suffering we’re talking about here. People are being subjugated for capital.[/indent]
Despite this, O’Flynn says, the people of Ireland have succumbed to passivity as far as the bondholders are concerned. The mainstream media, he adds, have been just as negligent in their coverage of opposition to the bailout terms.
“With regards to people taking notice of us, it’s the same old story all over again. But then, I figured this was going to happen.
“We’ve been holding weekly parades in Ballyhea for the last 22 weeks and in Charleville for the last six weeks, but they’ve been totally ignored by the media. It’s as if they’ve decided that there’s a blanket ban on covering any protests.
There’s an old saying that the more people that witness a crime, the less likely it is that somebody will report it. This is the biggest bank heist in the history of the state.
Despite the reaction to his previous protests, O’Flynn will not be deterred and he is adamant that the community marches in Cork will continue every week, even if his latest personal effort ends in further disappointment.
“When I get into something, I get into it 100%,” he explains. “Even when I was a young fella playing hurling, I was always trying to fight someone else’s fight.”
“I’ve lost about a stone in weight – that’s my contribution to Ireland’s cause.”
From The Score.
Braz is beaming with pride
Ah the world is fucked.
Our debt is going to looking like peanuts when the rest of them collapse. They will be so worried trying to save Italy and Spain, they will forget about the money they gave us.
The USA runs at a deficit of 200bn a month, and we’re shitting our pants over cutting 4bn a year
It said on the news on the radio earlier we’re about to hit a double dip recession. What will that mean for someone like me?
That’s a very open question, which will leave you open to answers which are both unkind and downright nasty
I’m fairly sure I would get those answers regardless of how open or closed the question is.
It will probably mean this whole recession/depression will drag on for another 2 or 3 years
You’re a very optimistic man
Shares prices are still tumbling this morning, Italian 10 year bonds are now trading at record high of 6.4%, even the Asian markets have dropped sharply. The end is nigh.
:lol:
That was Brian Lenihans plan in the Vincent Browne Sketch