Sunday, November 14, 2010

Time to buy Govt Bonds

Irish government bonds, recently trading at over 9% on the secondary market, are being sold at a significant discount to their original issue price.

The government should now instruct the state-owned National Pension Reserve Fund (NPRF) to buy these bonds at their current discounted levels.

There are a number of benefits to this approach:

(i) it will, in real terms, improve our National Debt:GDP ratio

(ii) it will send a signal to the markets that we have confidence in our ability to manage our way out of this crisis

and last but not least,

(iii) it will remove these headline-grabbing rates (for relatively small amounts of stock) from the domestic and international media with their confidence-sapping talking heads, headlines, opinion columns and editorials.

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