* S&P ratings lift for Ireland adds to buoyant mood
* Other peripheral yields at historic lows on ECB stimulus
* Spanish 10-yr yields fall below U.S. T-notes
By Emelia Sithole-Matarise
LONDON, June 9 Irish bond yields dipped to a
record low on Monday after Standard & Poor's upgraded the
country's credit ratings, adding to the buoyant mood in
peripheral euro zone debt triggered by fresh European Central
Other peripheral euro zone bond yields also hit the latest
in a series of historic lows, with Spanish 10-year yields
falling below those of U.S. Treasuries for the first time since
S&P raised Ireland's credit standing to "A-" from "BBB+"
late on Friday and said it could upgrade it further if
additional data confirmed the recovery of the country's economy
and that fiscal deficits have fallen below 3 percent of gross
It affirmed Italy's rating at "BBB/A-2" with a negative
outlook. Moody's is scheduled to review Italy's ratings on
Irish 10-year yields fell 5 basis points to 2.40
percent with Spanish yields down by a similar amount
at 2.60 percent. Italian equivalents were 4 bps lower at 2.71
"Clearly Ireland's ratings upgrade adds to the increasingly
better news for the peripheral in general but ratings agencies
tend to lag what the market is doing," said Orlando Green, a
strategist at Credit Agricole.
"But broadly this is certainly about the market looking at
the ECB and what they have done and what they will do in the
future so investors are grabbing yields while they can."
Last week's easing measures by the ECB has given fresh
impetus to a two-year euro zone debt rally that has driven
borrowing costs in countries that were at the forefront of the
sovereign debt crisis to record lows.
The ECB cut all its main rates to record lows, and ECB
President Mario Draghi also outlined a new long-term loan
programme (TLTRO) for banks to promote lending to small and
Some analysts said banks were likely to use the four-year
loans to buy shorter-dated peripheral euro zone bonds and repay
the money two years later, as there was nothing yet in the
conditions to dissuade them from such trades.
"As the dust settles and market players get a handle on the
generous terms and conditions of the new facility, a re-run of
the LTRO carry trade emerges as the most plausible scenario ....
The flamboyant 'liquidity-on' sentiment should extend this
week," Commerzbank strategists said in a note.
(Editing by John Stonestreet)