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The world backs away from Ireland, Spain, Portugal
04 November 2010 @ 14:04

Ireland and Spain are no longer eligible for investment by Russia’s two sovereign wealth funds — a canny spot by Bloomberg. The two countries still appear on the Ministry’s English language website, which we assume has not yet been updated.

And such retreat could not have come at a worse time for eurozone peripherals. Yields on Irish 10-year bonds have risen 132 basis points since mid-October to 7.44 per cent. And 10-year bonds from Portugal — which saw a lacklustre bond auction on Wednesday– are up 55 basis points in the same period to 6.29 per cent. And yet –  even with such enticing high yields in an (increasingly) low-yield environment — it seems investors like Russia’s €130bn-strong SWFs just don’t want it.

This is of course is a bit of a problem for peripheral Europe. Without traditional investors left to support their debt they may well have to turn to the European Financial Stability Facility (EFSF) . The headline number here is €440bn, but because of the facility’s structure available funds are likely to be a lot less.

More at FT Alphaville



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