Irish senior debt sharply tighter after stress test

LONDON, April 1 (Reuters) – Irish banks’ senior debt rallied
sharply in early trade on Friday after Dublin’s finance minister
said he accepted it would be unwise to impose losses on senior
bondholders at banks that he wishes to remain open.

Allied Irish Banks’ 4.5 percent bond due October 2012 rose 9
points to 87, in terms of price — or some 600 basis points
lower in yield terms, according to Tradeweb.

According to a trader at a U.S. dealer, in the cash market,
senior Irish banks are up five to 10 points overall.

Speaking on the release of Ireland’s banking stress tests on
Thursday, Finance Minister Michael Noonan dropped a previous
threat by new government to impose losses on senior unsecured
bonds in Bank of Ireland and Allied Irish Bank (ALBK.I: Quote, Profile, Research).

Trading in AIB’s five year credit default swap fell to 17.5
points upfront, 1.5 points tighter, according to Markit’s Gavan
Nolan, who said that trading in the CDS market was very
illiquid.

Conversely Bank of Ireland’s capital requirements exceeded
expectations and the bank’s subordinated bonds have
underperformed sharply, falling to six points to 39 for the July
floating rate lower tier 2 due July 2018.

(Reporting by Alex Chambers, IFR Markets; editing by Patrick
Graham)

Irish senior debt sharply tighter after stress test