It’s acronym war. Sovereign wealth funds in Norway and Russia are backing away from Irish and Spanish debt, sending bond prices down and yields up – in some cases to record levels. Rumour has it the ECB is trying to help by buying peripheral eurozone debt, which is slowing but not halting rising yields.

So the big question is: will the rescue fund be needed? The ECB’s largest weekly bond purchase was about $23bn, after all, and these SWFs between them command $663bn. What proportion of that is invested in Spain and Ireland, we can’t be sure, but the (very short) list of Russia’s remaining investable countries suggests the Russian holdings in each country were significant.

Take Ireland. Irish 10-year bond yields reached record highs of 7.53 per cent today. Not a lot has changed in the country itself. But (perhaps ill-timed) discussions on the shape of a permanent rescue fund in the EU have changed a great deal. First, the possibility of a debt restructure is alive and well; a permanent fund is needed, after all. Second, there is talk that bondholders will have to bear some of the loss in the case of a restructure. Default no longer means delay: it might mean a significant loss.

The point at which the Eurozone Financial Stability Fund would offer its services, and the rate at which it would lend are unknown. A mooted rate is 8 per cent, and Ireland seems perilously close. Two things here. Read more