Record Stress In Irish Sovereign Bonds

Last week, I mentioned that Greek, Irish, and Portuguese sovereign bonds were showing stress again. Here it is popping up this week:

Nov. 1 (Bloomberg) -- Irish bonds declined, driving the extra yield investors demand to hold the securities instead of German debt to a record, on heightened concern the nation will struggle to fund its budget deficit.

Credit-default swaps on Ireland jumped 22 basis points to 495.5, surpassing the Sept. 27 record closing price. Greek swaps climbed 37 basis points to 831.5, the highest level since Sept. 20, while Portugal’s added 11 basis points to 390. Spanish swaps rose 9.5 basis points to 224 and swaps for Italy increased 2.5 basis points to 174, CMA prices show. An increase signals deterioration in perceptions of credit quality.

“The biggest worry about Ireland is the growth picture,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. Good point.

Yet there is little worry about growth on these shores. I'm hearing calls for 1,500 in the S&P being made: targets which are based on earnings multiples which are further based on growth projections which are further based on current high levels of optimism. Analysts are masters at extrapolating the present, and doing so at the most inopportune times. Now is the time to be managing your risk.