Good afternoon, it is February 16th 2021 and here is your economic and market update from BlackBee.
- Banks claim capital requirements for high mortgage rates
- High demand for first issuance of Italy’s Draghi bonds
Capital requirements enforced by European regulators are contributing to high mortgage rates in Ireland according to a Banking & Payments Federation Ireland commissioned paper. The study found that Irish lenders are required to hold approximately three times more capital when compared to average capital requirements in Europe. This is due to the perceived risk of the Irish bank mortgage loan books and has a direct impact on the Irish mortgage market. Central Bank of Ireland highlighted in December that Ireland has the second most expensive mortgage rates in the Euro area, second only to Greece. The average rate of a new mortgage is 2.76%. Brian Hayes, CEO of BPFI claims that capital requirements for Irish banks are still “trapped” at global financial crisis levels (Source: Irish Times)
Primary debt markets have react strongly in favour of Mario Draghi’s appointment as Italy’s new prime minister. The former European Central Bank President was sworn into office on Saturday February 13th. Today’s ten year bond order book was the first since Mr. Draghi took office. According to the FT, €110 bn of orders were place. In June 2020, €108 billion of 10 year bonds were raised which at the time was a record for the largest syndicated Italian bond sale. Yield of the latest 10 year bonds were priced at c. 0.57%, 4 basis points higher than the current generic 10 year bond benchmark. If they prices go ahead, they yields would be amongst the lowest borrowing rates that country has had to pay in a decade. (Source: FT)
Global Market Update
(as at close of markets 15/02/2021)