Irish Spreads Jump As Country Is First To Officially Double Dip

Tyler Durden's picture

Irish bond spreads are back in the spotlight, with Bund spreads jumping by over 20 bps  to over 415 bps, although not on the heels of a failed auction (the country did auction off €400 million in February and April 2011 bills earlier, which was less than sought), but rather on news that Ireland is the first country in Europe to officially double dip back into negative growth. Ireland was also the first European country to dip into recession what may seem like an eternity ago. The stunner is just how vast the difference between the expected and the actual economic reality was. As BBC reports: "The Irish economy shrank in the second quarter
from the previous three months, surprising analysts who had been
expecting growth.
Gross domestic product (GDP) fell 1.2%, the Central
Statistics Office said. It also revised down its measure of growth in
the first quarter to 2.2% from 2.7%
." So poor Ireland not only has to deal with a drunk PM, insolvent bank system, and, what is not surprising a new economic crunch, but what is far more concerning, a Department of Truth and Unicorns, which is unable to lie its teeth off and paint a rosy picture when the feces are already in process of being fanned.

Amusingly enough, the reason cited by the Irish Finance minister as the reason for the depressed GDP figure, is the surge in imports during Q2. So now we know who was buying up everything China was making, even if it cost them a formal double dip announcement.

More from BBC:

The government has been seeking to reassure investors about the economy.

Most economists had predicted a 0.5% rise in GDP.

"It's well below [the consensus forecast] and a disappointing figure clearly," said Dan McLaughlin, Bank of Ireland's chief economist.

"One could take some comfort from the fact that domestic demand is beginning to show some signs of life," he added.

"Probably people will now have to reassess their outlook for this year overall."

The Central Statistics Office said the economy had been hit by a fall in consumer spending - down 1.7% compared with the same period last year.

As for the T-Bill auction that occurred just before the announcement, and which is already trading underwater so the investors must be quite unhappy (although with "them" being primarily the ECB, JCT is quite content with burning money), here are the auction details.

- Irish 14-Feb-11 T-Bill auction for EUR 0.3bln, bid/cover 4.1 vs. Prev. 9.4 (yield 1.907% vs. Prev. 1.925%)

- Irish 18-Apr-11 T-Bill auction for EUR 0.1bln, bid/cover 11.7 vs. Prev. 5.4 (yield 2.231% vs. Prev. 2.19%)

The 400 million auctioned off was actually less than the country sought to sell:

Ireland auctioned 400 million euros
($533 million) of bills, less than the maximum sought by the
debt agency, as concern mounted that growth in the region is
slowing, making it harder for governments to cut their deficits.

Considering that the bailout of AIB will cost between €25 and 35 billion, Ireland may really want to crank up the debt issuance apparatus rather soon.

The Dublin-based National Treasury Management Agency

Indicatively, if and when the US has to pay almost 2% for 4 month paper, it's all over.

h/t Ciaran