The €7.9bn bond purchase

Last month Anglo confirmed that it had repaid €7.9bn in bonds at the end of September. According to the Irish Independent:

Banking sources yesterday stressed that there was never any question of Anglo not repaying the debt that fell due in September, since the bank is legally obliged to pay government-guaranteed debt.

The Department of Finance categorically rejected suggestions that it had been involved in any deal to refinance Anglo’s balance sheet, stressing that funding matters are handled by the bank.

The exact details of the September refinancing are unclear but it is understood that the bulk of the money came from the ECB, with Anglo pledging various securities as collateral.

Market sources stress that this is the normal way for Irish banks to refinance bonds that fall due, given the state of the international markets.

A spokesman for the Central Bank said “all of the guaranteed bonds issued by Irish banks have been repaid by the Irish banks as they fell due”.

Myself and Lorcan were chatting about this and Lorcan pointed to an interesting item on the Irish Central Bank’s recent data. Here is a spreadsheet from the CB. Look close at the ‘other assets’ and notice the jump from August to September. In August the other assets of our Central Bank amounted to €14,378 million. By the end of September, the figure had jumped to €21,195 million, a jump of €6.8bn. Historically, this is the biggest jump in other assets, excluding the period around Anglo nationalisation (Feb 2009) and the period around the Northern Rock crisis (September 2007). But what better illustrates this is a graph. So here is a timeline of ‘other assets’ of our Central Bank from 2003 to September 2010:

Here is the table:

So the question is: Where did Anglo Irish get €7.9bn to pay back bondholders, and did our Central Bank foot the bill? And how involved were the ECB in this transaction? If the CB did what it looks like they did, we essentially just transferred the ‘asset’ from one state agency to another.

5 thoughts on “The €7.9bn bond purchase”

  1. Sweet jesus, does the right hand actually know what the left is doing!!!!!!!!!!!!!! I’m part of the brain drain, and with this sorta thing going on, I won’t be returning any time soon!

  2. Frightenomics.
    This line from the Indo piece really sticks out – “with Anglo pledging various securities as collateral.”
    How on this or any other holy earth does Anglo have anything to pledge as ‘collateral’ worth €7.9bn?

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