After convincing investors and the European Central Bank that it’s not Greece, Ireland may find it harder to escape the fallout from Italian turmoil.
Irish bonds have declined almost 3.6 percent since the end of September, eroding the highest returns in the world since June. Since falling to an eight-month low on Oct. 4, the yield on two-year Irish notes has jumped to about 75 basis points above its average of the past two months, according to data compiled by Bloomberg.
Borrowing costs for Ireland, which announced additional austerity measures last week, have risen as Italian Prime Minister Silvio Berlusconi agreed to resign to win parliamentary approval of plans to cut the region’s second-biggest debt load and Greek premier George Papandreou tries to form a unity government under a new leader.
“If the disaster scenario happens, I’m sure they’ll get hit with the same kind of contagion again,” said Haig Bathgate, chief investment officer at Turcan Connell, an Edinburgh-based manager of 1 billion pounds ($1.6 billion) for mainly wealthy clients. Current levels are “probably as good as it’s going to get until the rest of periphery Europe is dealt with,” he said.
Bathgate said he bought Irish bonds in July before selling them at the end of August.
