Irish state pays less than Spain in strong debt market re-entry

Tim Wallace
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THE IRISH government’s borrowing costs dropped below Spain’s yesterday, as the celtic nation continued its recovery from collapse and Spain continues to struggle close to the brink.

Meanwhile Germany’s industrial output kept rising in May despite the weak state of its Eurozone neighbours.

Despite much of the rest of the currency area being in recession, the powerhouse of German manufacturing kept on expanding – industrial output rose 0.6 per cent in the month.

Export orders drove the rise, with a 7.7 per cent rise in demand from other Eurozone countries, while domestic demand slid 1.3 per cent on the month.

That weak domestic demand led economists to warn the economy may not manage to avoid contraction at some point this year, while the ongoing recessions in much of Europe mean export demand may also drop back in coming months.

Ireland borrowed €500m (£399m) for three months at an average yield of 1.8 per cent, in its first round of debt issuance in almost two years, following its IMF and EU bailout.

That is below the 2.36 per cent paid by Spain at a similar auction last week, where the government also saw 10-year borrowing costs rise to 6.43 per cent as part of a larger bond auction totalling €3bn.

“The bidding was very scrappy,” said rate strategist Marc Ostwald at Monument Securities.

“It’s indicative of the lack of liquidity, it also is indicative that neither the domestic investors nor anybody else are confident that what has been cobbled together so far is any solution for Spain.”