We are not issuing bonds, so the cost of servicing our debt has not magically risen to ‘7%’ because we are not borrowing at that rate, what is happening is all in the secondary market.
What that means: The primary market is when the bond is first issued at par (100) and with a coupon (for instance 3%). When a bond is issued the main concern of a bond buyer is getting your capital back (that par value of 100) and it trumps the yield in terms of importance, so you regularly see people buy debt at very low rates from those most likely to pay it back, Microsoft recently issued a bond at 0.8%!
That is where the Ireland story gets interesting, our bond yield is not 7% because we issued it at that yield or interest rate, it is 7% because people are sacrificing their capital to get out of the trade. That means they don’t believe they will get their money back at the end and …