European Worries Not Over

Ireland seems to be coming in for a bit of a beating at the moment. With the Irish government suffering a series of downgrades over the last year and a half Allied Irish Bank has now had to be bailed out again placing them under further pressure. S&P have indicated that it may downgrade Ireland further as the AIB bailout looks like exceeding EU 35bn. Irish 10-yr bonds jumped 17bps to be 453 points over the German Bunds - a record. Irish CDS spreads are now 522bps, a lift of 33.

Portugal and Spain are now also feeling a bit of spill-over angst.

These issues will only impact on Australia if they worsen and could come in the form of; increased difficulties for global fund raising by domestic banks (in turn this will keep margins high for term deposits) and a potential delay by the RBA in the next cash rate rise - widely expected to be next week.