Uneven day for Irish CDS spreads

Credit protection on major Irish banks stabilises despite concerns over a sovereign bailout

Despite being faced with the possibility of a majority takeover by the Irish government, five-year credit default swap (CDS) spreads on Allied Irish Bank (AIB) fell from a high of 1,200 basis points (bp) at 13:30 on November 24 to 1,127bp at close of play today.

Meanwhile, spreads on Bank of Ireland widened from 756bp to 820.9bp in the same period, while credit protection on insurance company Irish Life & Permanent fell from 861.3bp to 850bp.

Analysts at Credit Suisse estimated today that adequate recapitalisation could mean the Irish government taking a 70% stake in Bank of Ireland and a 97% stake in AIB.

Sovereign debt protection costs for the peripheral eurozone nations continued to stabilise, with CDS spreads on Ireland and Greece widening slightly from 579bp to 586.1bp and 957bp to 960.3bp respectively. Portugal's spreads also widened slightly, going from 480bp to 485.3bp, as did those of Spain, moving from 301bp to 303.7bp. Meanwhile, credit protection on core eurozone countries remained unmoved, with Germany priced at 42bp after rising from 37bp on November 19.