{"id":852035,"date":"2026-09-18T11:16:15","date_gmt":"2026-09-18T11:16:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/852035\/"},"modified":"2026-09-18T11:16:15","modified_gmt":"2026-09-18T11:16:15","slug":"global-markets-are-signalling-danger-heres-what-it-means-for-irish-households-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/852035\/","title":{"rendered":"Global markets are signalling danger. Here\u2019s what it means for Irish households \u2013 The Irish Times"},"content":{"rendered":"

How do we interpret the turmoil on global markets? US<\/a> longer-term borrowing costs have touched levels not seen since 2007, the Federal Reserve<\/a> has pushed up its key interest rate \u2013 against the wishes of US president Donald Trump<\/a> \u2013 and international markets don\u2019t seem to know which side is up. <\/p>\n

What does this mean for Ireland and for Irish households and do we need to be worried?<\/p>\n

Why is it happening? <\/p>\n

Interest rates<\/a> are rising for two fundamental reasons. One is an expectation that inflation will now climb again mainly because of higher energy costs, with no end to the Gulf crisis<\/a> in sight and worrying signs elsewhere, such as in European gas markets, and food costs.<\/p>\n

News here is likely to ebb and flow \u2013 wholesale energy prices<\/a> rose sharply over recent weeks on a string of bad news, though oil<\/a> eased on Thursday on hopes of an opening of a key Saudi oil pipeline.<\/p>\n

The second reason is competition for investor funds. Governments across the world have borrowed heavily over the past years and continue to look for cash to fund budget deficits and renewal of expiring debt. <\/p>\n

[\u00a0Irish borrowing costs hit bailout-era highs as investors up bets on rate hikesOpens in new window<\/a>\u00a0]<\/p>\n

Meanwhile major tech companies are also borrowing billions to invest in artificial intelligence<\/a> (AI) infrastructure, hugely increasing the demand for cash from the private sector. They are competing with government for the cash investors have to allocate and this has pushed up interest rates.<\/p>\n

\u201cThe so-called hyperscalers are out in the market raising funding, and so the competition for capital is real,\u201d according to US Federal Reserve Board chair Kevin Warsh<\/a>, speaking this week.<\/p>\n

Morgan Stanley<\/a> has estimated that AI-related borrowings could reach $570 billion (\u20ac496 billion) this year alone, with the five major \u201chyperscalers\u201d \u2013 Amazon<\/a>, Alphabet<\/a>, Meta<\/a>, Microsoft<\/a> and Oracle<\/a> \u2013 responsible for more than $250 billion of this. They are no longer able to fund spending through their cash flows and so have to borrow.<\/p>\n

The resilience of the world economy to the many recent pressures has also affected the bond market \u2013 lower growth would have pointed to lower interest rates by cutting the demand for borrowings. <\/p>\n

\"\"Soaring energy costs and why \u2018we can\u2019t protect everyone from the impact of war\u2019So this is all normal then? <\/p>\n

No. Not at all. The scale of change has been notable and unusual. There has been a nasty reversal in government bond<\/a> prices in recent weeks in markets across the world, led by the US, pushing interest rates \u2013 which move inversely to bond prices \u2013 higher. <\/p>\n

The scale of this is not normal. And the move in the US 10-year interest rate \u2013 dubbed by the Financial Times as the world\u2019s most important interest rate, as it is seen as a benchmark \u2013 is notable. It has risen from 4.7 per cent a month ago to about 5 per cent \u2013 having reached 5.041 per cent, its highest level since June 2007, on Tuesday. <\/p>\n

Hawkish comments by Warsh after Wednesday\u2019s interest rate increase is likely to keep bond markets on edge, particularly for short-term borrowings. <\/p>\n

But this is a US thing, isn\u2019t it? <\/p>\n

Government borrowing markets worldwide have been hit, mainly for the same reasons \u2013 fears of higher inflation and competition for funds. Irish longer-term interest rates are at levels last seen in 2013, with the 10-year yield over 3.6 per cent on Thursday. You could take a glass-half-full or half-empty approach here. <\/p>\n

Borrowing costs are at their highest levels for many years and this has implications in the longer term for the public finances \u2013 there is no going back to the super-low interest rates which applied from after the financial crash until after Covid-19. <\/p>\n

\"NTMANTMA chief executive Frank O\u2019Connor. Photograph: Bryan O\u2019Brien\/The Irish Times<\/p>\n

So the cost of borrowing for Ireland will gradually rise as existing fixed-rate debt falls to be refinanced at higher costs. Frank O\u2019Connor, chief executive of the National Treasury Management Agency<\/a> has warned that the cost of making repayments for Ireland on the national debt could rise from about \u20ac3 billion this year to \u20ac6 billion by 2030.<\/p>\n

The more optimistic view is that Irish borrowing costs remain low by international standards. German 10-year rates \u2013 the euro-zone benchmark \u2013 are at just over 3.5 per cent while French and Italian rates are in the 4.3 to 4.4 per cent range. <\/p>\n

[\u00a0Bond sell-off accelerates globally as investors bet on interest rate hikeOpens in new window<\/a>\u00a0]<\/p>\n

A key issue to watch in international bond markets in the weeks ahead is whether problems emerge for any country trying to raise funds, leading rates to spike higher. <\/p>\n

But the equity market keeps rising? <\/p>\n

So far, yes. Higher bond interest rates can put pressure on equities through a range of channels. For one thing, investors wanting to put money into US dollar assets can now make a safe bet by putting them into treasuries (as US government bonds are known) at a risk-free interest rate of more than 5 per cent. This raises the bar in terms of investing money in equities. <\/p>\n

Higher interest rates can also slow economic growth, hitting company profitability \u2013 and can also make it more difficult to countries to support their economies through higher spending. <\/p>\n

All that said, for now the hopes that major companies can benefit from AI \u2013 and that the technology can lead to a general rise in productivity across economies \u2013 continues to support equities. So does the reasonably positive growth story in many major economies, itself supported by massive AI investment.<\/p>\n

And the recent US earnings season \u2013 in which companies reported second-quarter results \u2013 saw more than eight out of 10 beating market estimates and average profitability running more than 25 per cent ahead of expectations.<\/p>\n

All this is supporting stock markets, despite high valuations and uncertainty about who will win the AI race and the wider economic and social implications of the technology. <\/p>\n

But add in the uncertain geopolitical backdrop and it all points to a nervous and volatile time for investors. Analysts at JP Morgan said this week in a note to clients on oil prices: ” For the first time since the start of the Iran conflict, we don\u2019t have a baseline view. We simply don\u2019t know how to model the endgame.” They had expected that the needs of politics and the US economy would have led to some kind of deal on the Strait of Hormuz by now. But it hasn\u2019t. So who knows?<\/p>\n

\"TheThe cost of living could rise again. Photograph: Julien Behal\/PA Wire What are the wider messages for the Irish economy and household finances?<\/p>\n

The main point is the recent change in the expectations for interest rates and inflation, which is pushing short- and longer-term interest rates higher.<\/p>\n

This threatens another twist to cost-of-living<\/a> pressures via higher energy costs for households, general pressures on inflation in areas such as food and higher interest rates. We have already seen higher prices at the pumps and a big rise in wholesale gas prices now threatens higher home heating bills. <\/p>\n

Expectations here have changed markedly in the space of a few weeks, partly due to the Gulf crisis. Before the last European Central Bank<\/a> interest rate rise, analysts on balance did not expect another increase later this year. Now they believe another rise will come in December and quite likely more next year. US rates are also expected to increase again. <\/p>\n

All this signals fears about higher inflation. And it means the main Irish banks are very likely to follow the latest ECB rise with moves of their own – beyond tracker mortgages, which adjust automatically – with more now likely to come in 2027. Even if the scale of this remains unclear, it is important for the mortgage and housing markets. <\/p>\n

[\u00a0Little justification for \u2018broad\u2019 cost-of-living supports in budget, Central Bank warnsOpens in new window<\/a>\u00a0]<\/p>\n

The wider implications in financial markets will take time to play out. Higher US interest rates may push up the US dollar, putting pressure on some other countries to follow.<\/p>\n

The Bank of Japan is widely expected to push up its borrowing costs on Friday. An unstable situation threatens upheaval in financial markets, particularly if there is a trigger such as another swing higher in wholesale energy prices. <\/p>\n

For households, pension<\/a> funds which typically invest in a range of assets will have gained from higher equities but been hit in recent months by falling bond prices. With funds for those closer to retirement tending to be more invested in bonds, many will see lower valuations. <\/p>\n

For the budget<\/a> next month, the outbreak of higher inflation and the renewed threat to energy prices poses real problems. Unless this eases, the complications of delivering a package to address the cost-of-living pressures are really significant. <\/p>\n","protected":false},"excerpt":{"rendered":"How do we interpret the turmoil on global markets? US longer-term borrowing costs have touched levels not seen…\n","protected":false},"author":2,"featured_media":852036,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[4613,960,4592,150,28,12586,12,101,69951,10954,359949,2800,9007,45588,1282,1281,1535,25141,7617,113955,221829,21,25],"class_list":["post-852035","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-alphabet","tag-amazon","tag-bonds","tag-budget","tag-business","tag-cost-of-living","tag-donald-trump","tag-economy","tag-energy-costs","tag-energy-crisis","tag-european-central-bank-ecb","tag-federal-reserve","tag-interest-rates","tag-kevin-warsh","tag-meta","tag-microsoft","tag-morgan-stanley","tag-oracle","tag-pension","tag-smart-money","tag-trump-presidency","tag-united-states","tag-us"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/852035","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=852035"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/852035\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/852036"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=852035"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=852035"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=852035"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}