FT: Templeton Bond Fund Is Ireland’s Largest Creditor

Tuesday, 04 Sep 2012 07:59 AM

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One U.S. bond fund has become Ireland’s biggest private-sector creditor, the Financial Times reports.

San Francisco-based Michael Hasenstab, who runs the Templeton Global Bond Fund, has been snapping up Irish government bonds lately, amassing 6.1 billion euros ($7.7 billion) in the asset class as of the end of June, according to Financial Times calculations.

“It will be challenging, but Ireland continues to take the necessary steps on the road toward recovery,” Hasenstab tells the Times.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

Other investors are watching with interest, pointing out that Ireland’s government debt market is small and illiquid, which ups the ante for investing so much in the only English-speaking country that uses the euro.

Recovery in Ireland and in the eurozone as a whole could pay off, while further downturn could come back and bruise the trading strategy.

“If they get it right they’ll be heroes, but if they ever have to get rid of some of their position it will be very difficult,” a rival bond investor tells the Times.

Others are watching with interest as well.

“It’s a punchy bet,” says one senior rival bond investor, according to the Times.

“It’s quite unusual to hold such a large position … Templeton building up such a large position has been a major driver for Ireland’s performance this year.”

Irish fiscal authorities were understandably pleased.

“They see Irish debt as very good value and have taken a firm decision that the Irish economy is recovering, has turned the corner and they will be paid back,” Brian Hayes, Ireland’s deputy finance minister, tells the Times.

“They will yield a substantial dividend from it,” he says.

Ireland is not without fans, including noted investor Wilbur Ross, chairman and CEO of WL Ross and Co.

“The country recently regained access to the long-term debt market. It’s the only bailed-out country to be ahead of the targets assigned to it by the troika of the [European Union, European Central Bank and the International Monetary Fund]” says Ross, The Deal reports.

“People still do not understand that Ireland has become a high-tech economy that has higher direct investment by American corporations than Brazil, Russia, India and China combined.”

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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