Irish bonds handed investors some of the best returns in Europe last year as the Government made it clear that it does not intend to inflict losses on bondholders.
Irish bonds performed twice as well as bonds generally even though bonds did far better last year than shares or commodities. Irish 10-year paper was up 12% in the year despite huge volatility throughout 2011.
The bonds benefited from the view that the Government will continue the previous government's policies and amid optimism that Ireland has made greater strides than other bailed-out eurozone economies. A bond's total return is made up of the change in its price, plus interest payments, assuming they are reinvested. For the first time since at least 1997, the bond market produced the highest returns of any financial asset, beating stocks, commodities and the dollar as Europe's sovereign-debt crisis threatened the global economy.
Bonds worldwide returned around 5.9%, including reinvested interest, Bank of America Merrill Lynch indexes show. Standard & Poor's GSCI Total Return Index of commodities fell 1.2% and the MSCI All Country World Index of shares tumbled 6.9%.