Bailout Boost Fades; Euro, Bonds Slammed

LONDON—The Irish rescue package announced over the weekend failed to soothe currency- and bond-market worries that sovereign-debt problems might spread within the euro zone, pushing the euro lower and raising yields on the debt of fiscally weaker euro-zone countries.

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“…upon the earth distressStrongs 4928: sunoche, soon-okh-ay´; from 4912; restraint, i.e. (figuratively) anxiety: — anguish, distress. of nations, with perplexityStrongs 640: aporia, ap-or-ee´-a; from the same as 639; a (state of) quandary:—perplexity.
Strongs 639: aporeo, ap-or-eh´-o; from a compound of 1 (as a negative particle) and the base of 4198; to have no way out, i.e. be at a loss (mentally):— (stand in) doubt, be perplexed
—Luke 21:25

Root of All Evil

“For the love of money is the root Strongs 4491: rhiza, hrid´-zah; apparently a primary word; a “root” (literally or figuratively):—root of all.of all evilStrongs 2556: kakos, kak-os´; apparently a primary word; worthless (intrinsically, such; whereas 4190 properly refers to effects), i.e. (subjectively) depraved, or (objectively) injurious:—bad, evil, harm, ill, noisome, wicked. which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrowsStrongs 3601: odune, od-oo´-nay; from 1416; grief (as dejecting): — sorrow..”
—1 Timothy 6:10

“The first hour was stronger, but we’ve sold off since then,” said Jim Reid, credit strategist at Deutsche Bank AG. “The markets are just looking for the next problem.”

In the currency market, analysts agreed that investors are now looking beyond Ireland to focus on the next potential problem euro member.

“The euro zone has been unable to make a fresh start despite the weekend news,” said Elsa Lignos, a currency strategist at RBC Capital Markets.

The euro rallied in Asian trading hours after the €85 billion ($112.6 billion) aid package was revealed. However, it quickly dropped back, and was trading at $1.3094 midday in New York, from $1.3248 late Friday in New York. It followed a similar pattern against the Swiss franc.

Sovereign-bond markets weakened along the euro zone’s periphery. The difference in yields on 10-year Portuguese, Spanish, Italian and Belgian government bonds, relative to safer German debt, widened, signalling that investors are demanding a greater return to hold assets they see as riskier.

Yields spreads had narrowed in early trading before widening. Ten-year spreads for Italian and Spanish debt hit record euro-era highs of 1.87 percentage points and 2.67 percentage points, up 0.13 and 0.17 percentage points, respectively.

Italy sold €6.837 billion of bonds Monday, only slightly below the maximum planned €7 billion, but paid higher yields than a month ago to sell the three- and 10-year debt.

The Belgian Debt Agency sold €2 billion of government bonds at an auction, having sought to sell a total of €2.5 billion to €3 billion.

Belgium’s 10-year spread to bunds rose 0.09 percentage point to 1.08 percentage points.

The cost of insuring peripheral sovereign debt using credit-default swaps also rose significantly. An investor wishing to insure $10 million of Spanish debt for five years would now pay $350,000 per year, up $25,000 from Friday. The cost of insuring Portuguese debt rose $43,000 per year to $545,000, while the price of protection against an Italian default rose $16,000 to $231,000.

Credit-default swaps function like an insurance contract for debt. If a borrower defaults, sellers compensate buyers.

The Irish aid package will consist of €67.5 billion from EU and IMF funds and bilateral loans from the U.K., Sweden and Denmark. The Irish state will also contribute €17.5 billion, which will come from the country’s National Pension Reserve Fund and from other domestic cash resources.

Ireland will pay an average interest rate of 5.8%, if the facility is completely drawn down.

—Neelabh Chaturvedi and Nick Andrews in London, Emese Bartha in Frankfurt and Ainsley Thomson, Quentin Fottrell and Nick Winning in Dublin contributed to this article.

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