October 15, 2019 / 12:47 PM / 2 months ago

Irish bonds rally on hope of EU-UK Brexit deal this week

LONDON, Oct 15 (Reuters) - Irish government bonds outperformed euro zone peers on Tuesday on hopes that Britain and the European Union will be able to reach a deal over the former’s exit from the bloc at a summit this week.

A senior German government official said some progress had been made in the talks but warned that London still had further to move in the EU’s direction to secure a deal.

The EU’s chief Brexit negotiator Michel Barnier is expected to brief EU governments on the progress of a potential deal on Wednesday. Barnier said he saw three possible scenarios ahead: a deal with Britain later on Tuesday, another delay to Britain’s departure or a “breakdown” of talks, according to diplomats with the bloc.

Ireland’s 10-year bond yields were down 6 bps on the day and back in negative territory at -0.02%. The spread over safe-haven German 10-year government bond yields fell to its lowest level since July, at 43 bps.. Dublin-listed shares rose 1.3% to the highest since Sept. 2018.

Britain is Ireland’s largest trading partner and its border with the British province of Northern Ireland has been the thorniest issue in Brexit negotiations. A disorderly Brexit also risks a return to the violence that plagued border areas for decades before 1998.

Reporting by Yoruk Bahceli and Elizabeth Howcroft

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