(Adds Bank of Portugal comment, updates prices)
By Padraic Halpin
DUBLIN Dec 9 Ireland's central bank will reduce
the pace of bond-buying under the euro zone's quantitative
easing stimulus programme in order to remain in the scheme until
its scheduled end next December, a source familiar with the
matter said on Friday.
The source said the central bank would reduce the pace of
purchases - which have stood at around 1 billion euros a month
recently - by around 50 percent.
This should allow it to avoid exceeding the amount of
eligible Irish debt that can be purchased and benefit from the
nine-month extension of QE that the European Central Bank
announced on Thursday.
Ireland's 10-year government bond yields rose to a two-week
high of 1.00 percent on Friday, up 6 basis points
on the day, while most other euro zone equivalents fell.
National central banks purchase their own government debt
under the ECB's bloc-wide stimulus programme.
A spokeswoman for the Irish central bank said it "will
manage the implementation of the purchase programmes carefully,
so that the impact of the programme parameters, or any changes
in these parameters, would be as smooth as possible."
Estimates from Cantor Fitzgerald and Societe Generale on
Friday showed that, at the current rate of purchase, the central
bank would have to stop buying bonds by March because of limits
on the amount of a country's debt and individual bonds that can
be bought under QE.
The ECB said on Thursday that changing those limits raised
Ryan McGrath, an analyst at Cantor Fitzgerald, said the
Irish government could also alleviate the problem further by
issuing new debt early next year, or by swapping some legacy
floating-rate debt related to the bailout of Anglo Irish Bank,
for new bonds that would be eligible for ECB purchase.
Ireland is not alone in potentially running into limits. One
of the bloc's weakest economies, Portugal, may also be headed
for an early exit from the scheme, analysts said.
The Bank of Portugal said on Friday that it will not alter
the way it purchases debt under QE, and will make sure
Portuguese debt is bought until the end of the plan.
Portugal was the only other euro zone country to see its
bond yields rise sharply on Friday, stretching the
gap with German equivalents close to its widest
level in 10 months.
(Reporting by Padraic Halpin in Dublin; Additional reporting by
Andrei Khalip in Lisbon; Writing by John Geddie; Editing by
Kevin Liffey and John Stonestreet)