Contagion

When you squeeze a balloon it just bulges out at a different place, that seems to be happening to the PIIGS (although now it is just PIS because I & G have been ‘sorted out’). Look at the prices on Irish banks coming down in some cases by an impressive near 1%, that’s a giant step for a single day. All of our major institutions are dropping – and that means the fear of something happening to our banks is subsiding from the perspective of those holding bond risk. Which makes Dolmens ‘sell all’ call on AIB LT2’s a little odd.

Then look at sovereigns

And you see that our problem has now become a Portuguese problem, the bond market will start to lean on them next. I have said for some time that we will watch the domino effect until at some point we get to Spain and at that point it isn’t a game any more.

Many thanks to CMA for the charts

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Irish debt, third most likely to default in the world?

Credit Default Swaps hit a record high yesterday for Irish Sovereign Debt. CNBC spoke to Brian Cowen on this topic yesterday, our Student Protests got a mention at the very start, Mr. Cowen believes this is short term sentiment, and while you can use a cyclical argument against Ireland, there is a secular argument about our debt: that it will be more expensive in the future (forever).

Using credit default swaps we are placing ahead (as in more risky) than Pakistan, Argentina and Iraq! Behind only Venezuela and Greece, interesting times….

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