Appetite for Irish sovereign debt remains scant among large investors, with many believing the political backdrop is too murky to take a punt despite the high yields on offer and the safety net of a probable bailout.
Interviews with major investment houses this week indicated that while some hedge funds may have been buying into Irish bonds in a limited way recently, overall, major investors are still wary.
Managers cited an unusual degree of uncertainty about whether Ireland would accept a bailout and how it would work. Tuesday's decision by euro zone ministers to send a joint European Union-International Monetary Fund mission to Ireland simply delayed clarification.
Funds ranging from the mainstream fixed income group at Investec Asset Management to the less constrained absolute returns team at HSBC Global Asset Management say they have no Irish debt and no plans to buy any.
"There is so much uncertainty," said John Stopford, head of fixed income at Investec AM. "It is making a speculative decision on political decisions. We need a lot more clarity on how this is going to work out over the next five years."
British fund firm Standard Life Investment's actions with its Irish sovereign debt underline that view.
Correctly anticipating at the beginning of summer that the spread of 10-year Irish yields over German Bunds was too narrow, it moved its exposure to underweight against its benchmark, selling a lot of the debt it was holding.
The spread has widened to a high of around 680 basis points recently from some 260 basis points in early June.
But the firm still holds some Irish bonds, believing Irish fundamentals are better than some other peripheral euro zone economies. It holds no Greek or Portuguese bonds, for example.
That said, the firm is not currently increasing its exposure to Ireland because of the uncertainty surrounding it.
"We are concerned that if they accept any funding from the EU or IMF (International Monetary Fund) there is the potential that Irish government debt could be downgraded," said investment strategist Richard Batty. "This could trigger another wave of selling, this time from passive index funds."
Passive, or tracker, funds follow an index and cannot change their exposure to individual assets as long as they remain in the index. A downgrade could kick Ireland out of some indexes.
But interest in Ireland is not completely absent.
U.S. investment house Loomis Sayles said last week that it has been increasing its exposure to Ireland because of the yield currently offered and an expectation that long-term credit quality will remain intact.
Some hedge funds, notorious for not talking about their trades, appear to be betting on Ireland, at least in a limited way.
"Most managers we know, if they're engaging with Irish debt, would be buyers rather than sellers, but they would be very short-term buyers, opportunistic," said Serge Umansky, chief executive officer and co-head of investment management at fixed income fund of hedge funds Signet Group.
Even with this, however, the appetite is small. Jason Manolopoulos, managing partner of Dromeus Capital in Athens, says Ireland is heading for a bailout but is still in the "denial phase," officially arguing it does not need one.
But the time for reassessment may come soon.
"I think there could be some additionally volatility, but we are approaching the situation where Irish longer-dated bonds, could be interesting to purchase, with a solid EU/IMF assistance program in place," he said.
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