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TruraBuoy

Could Someone Please Explain This

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Linky http://online.wsj.com/article/BT-CO-20100927-711193.html

NEW YORK (Dow Jones)--The cost to insure Irish sovereign debt against non-payment or default using derivatives known as credit default swaps could close at a record on Monday night around 485 basis points as fresh fears about the nation's debt problems continue to surface.

That's equivalent to $485,000 annually to cover $10 million of bonds for five years, based on prices from CDS data provider Markit at 2 p.m. EDT.

At Friday's close in New York, the cost was $462,000. The previous record close for CDS on Ireland was Thursday at $477,000, said Markit, although the intraday record was $515,000 the same day.

Ireland's woes stem from its troubled banking sector, which needed a government rescue. Early Monday, Moody's Investors Service cut the credit ratings of Anglo Irish Bank's unguaranteed senior unsecured debt three notches to Baa3 from A3, reflecting the "greater marginal risk" without government support of the securities. Baa3 is the last rung on the ratings ladder before non-investment grade territory, or "junk" debt.

"In the absence of explicit government guarantees, the senior unsecured debt ratings could be further downgraded into sub-investment grade," wrote Ross Abercromby, a senior analyst in the financial institutions group at Moody's in London. "However, there is the potential for the senior debt ratings to be upgraded if, following the reorganization, effective guarantees are put in place by the Irish government."

The bank's subordinated debt was also lowered six notches to Caa1 from Ba1. Anglo Irish is being split into a "good bank"/"bad bank" model in a restructuring overseen by the European Commission.

CDS on Anglo Irish rose 5 basis points from Friday's close to 625 basis points Monday afternoon, with a 50 basis-point differential on the cost at which market-makers were agreeing to buy and sell protection. According to Otis Casey, an analyst at Markit in New York, "Market makers will sometimes widen their bid/ask spreads in response to volatile market conditions where the chance for price levels to gap significantly higher or lower are increased."

Bid/ask spreads on Irish sovereign CDS were 20 basis points Monday, with the CDS at 485 basis points. Early Monday in London, the CDS sat around 460 basis points shortly after the downgrade.

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An investor buying $10m of Irish government debt needs to pay $485k pa insurance against the Irish government defaulting on debt repayment.

So it costs $12.5m over 5 years to buy $10m of Irish debt over 5 years and insure it.

Irish banks make money through buying this debt and not insuring it. And they also offer insurance against default. Easy money.

Pension funds are obliged to insure and lose money but that only hits Irish people who are making their pension safe, i.e. 55-65.

Big scam.

Linky http://online.wsj.com/article/BT-CO-20100927-711193.html

NEW YORK (Dow Jones)--The cost to insure Irish sovereign debt against non-payment or default using derivatives known as credit default swaps could close at a record on Monday night around 485 basis points as fresh fears about the nation's debt problems continue to surface.

That's equivalent to $485,000 annually to cover $10 million of bonds for five years, based on prices from CDS data provider Markit at 2 p.m. EDT.

At Friday's close in New York, the cost was $462,000. The previous record close for CDS on Ireland was Thursday at $477,000, said Markit, although the intraday record was $515,000 the same day.

Ireland's woes stem from its troubled banking sector, which needed a government rescue. Early Monday, Moody's Investors Service cut the credit ratings of Anglo Irish Bank's unguaranteed senior unsecured debt three notches to Baa3 from A3, reflecting the "greater marginal risk" without government support of the securities. Baa3 is the last rung on the ratings ladder before non-investment grade territory, or "junk" debt.

"In the absence of explicit government guarantees, the senior unsecured debt ratings could be further downgraded into sub-investment grade," wrote Ross Abercromby, a senior analyst in the financial institutions group at Moody's in London. "However, there is the potential for the senior debt ratings to be upgraded if, following the reorganization, effective guarantees are put in place by the Irish government."

The bank's subordinated debt was also lowered six notches to Caa1 from Ba1. Anglo Irish is being split into a "good bank"/"bad bank" model in a restructuring overseen by the European Commission.

CDS on Anglo Irish rose 5 basis points from Friday's close to 625 basis points Monday afternoon, with a 50 basis-point differential on the cost at which market-makers were agreeing to buy and sell protection. According to Otis Casey, an analyst at Markit in New York, "Market makers will sometimes widen their bid/ask spreads in response to volatile market conditions where the chance for price levels to gap significantly higher or lower are increased."

Bid/ask spreads on Irish sovereign CDS were 20 basis points Monday, with the CDS at 485 basis points. Early Monday in London, the CDS sat around 460 basis points shortly after the downgrade.

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25 Sep 2010

http://www.telegraph.co.uk/finance/economics/8024197/Concerns-over-Irish-debt-ease.html

Ireland was buoyed by Goldman Sachs, which said the country won't face a Greek-style crisis, following Thursday's surprise announcement that GDP shrank 1.2pc in the second quarter.

"A repeat of the Greek debt turmoil in Ireland is very unlikely," said Michael Vaknin, a senior fixed-income strategist at Goldman.

And yet a few days ago we had the following....

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Used to mean you pay AIG or lehmans a sum of money to go and spend how they see fit. If a situation arises where you need to claim, AIG or Lehmans declare bankrupcy :lol:

Thats what i thought anyway. Now the taxpayer presumably covers all this, no moral hazard there.

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Thanks for the answer FallingBuzzard. Another stupid question does this mean that the Irish are stuffed?

Think of it like this. You foolishly lend someone you think of as your mate a grand.

Then you need the money back. In normal times, you could have sold his debt on to another mate, and got your grand back, leaving your mate who borrowed the money owing your mate who just bought the debt off of you. Or your mate might even have paid you back himself.

So you are now in this situation where you need that grand back, so you can pay the bank to stop them taking your house away. Your mate that owes you the money also needs the money to feed his kids, but he cant borrow any more because no one trusts him to pay back.

So Ireland is stuffed, and those that lent to Ireland are stuffed.

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So to sum up:-

Tigger had pre-tested the current and dropped his stick in the quickest flow.

He then bounced off with all the loot, leaving piglet and pooh with their sticks still in their hands, murmuring expletives about fat cats! :P

Edited by erranta

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So to sum up:-

Tigger had pre-tested the current and dropped his stick in the quickest flow.

He then bounced off with all the loot, leaving piglet and pooh with their sticks still in their hands, murmuring expletives about fat cats! :P

Exactly. Jack has half a barrel of good apples, and Jill has half a firken of beer. Now if one wheel on their wagon were to come off, then it doesnt take a genius to join up all the dots and make a new policy.

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  • 244 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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