Borrowing costs

Ireland’s sovereign borrowing costs rise amid further interest rate hikes expected

The market cost of borrowing for Ireland and other governments across Europe rose on Monday on expectations that the European Central Bank intends to push official interest rates to the limit again. increase in the fight against inflation.

Ireland’s 10-year bond yield rose to 2.38%, up significantly during the session. The implicit cost of borrowing for many governments has also increased.

The 10-year borrowing and redemption cost for France was only marginally lower at 2.35%, while German and Italian yields traded at 1.80% and 4.09% respectively.

Other eurozone government bond yields also traded higher as investors braced for another big rate hike from the US Federal Reserve and several more central bank meetings this week.

The Fed is expected to raise rates by 75 basis points, or three-quarters of a point, on Wednesday, while markets are pricing in a roughly 20% chance of a 1% hike in an effort to keep inflation under control.

“Investors will focus on the new [Fed’s] dot chart of interest rate projections,” said Francesco Maria Di Bella, fixed income strategist at UniCredit.

A number of ECB officials, including its chief economist Philip Lane, the former Irish central bank governor, added to the hawkish sentiment over the weekend by saying the ECB could raise interest rates next year.

The Bank of Japan and the Bank of England are also meeting this week. The yield on the UK 10-year bond traded at 3.15%.

• Additional Reuters reports