Irish two-year notes slumped, leading the bonds of the region’s most-indebted nations lower, on concern a permanent solution to the fiscal crisis will elude European Union leaders meeting at a summit starting tomorrow.
The declines drove the yield on the security to more than 10 percent for the second consecutive day, while the spread investors demand to hold Irish 10-year bonds instead of German bunds climbed to a record.
- You and I and every other Irish sucker deposits our money with an Irish Bank;
- The Irish Banks buy Irish Sovereign bonds (debt that our government(s) have taken on – rightly or wrongly – as your debt);
- This pays the Bank over 10% interest
- It is over 10% because of the discount – the risk – associated with the Irish State, as a direct result of it taking on the Banks’ debts;
- The Irish Bank then pays you – the sap who is not only giving it your money, but bailing out all its friends – only ~1%!
- The Irish banks then pocket the difference – around 9%!