1. 20th Sept 2010
Market Commentary
Government Bonds: Bonds yield movements were mixed last week.
Key Points last week
In the US investor fears of a double dip recession subsided somewhat
• Irish bonds yields and CDS reach news highs.
following recent positive data.-importantly yields are still below key
• EU Financials perform well after Basel III announcement
reversal levels. In Europe, peripheral bond yields traded aggressively
• Japan intervenes to weaken the Yen.
higher particularly in Ireland and Portugal ahead of this week’s Govern-
Economic Comment: After a more positive start to the week
ment bond issuance. We expect a period of consolidation in core bond
equity markets gave up their gains and German bonds reversed
markets with yields trading in an established range in the coming
their losses with investors once again moving their money to
weeks.
safest assets. Having approached the 2.5% levels the 10-year
Corporate Bonds: Credit markets were positive in the wider Euro-
German bond recovered to finish almost 10bps lower as the week
zone after news from the Basel III meeting that the banks would have
drew to a close. Meanwhile Japanese authorities engaged in
more time to incorporate stricter new rules regarding capital ratios.
currency depreciation activities by supplying excess Yen when
Following this news many investors began to speculate that certain
buying up US dollars in order to help domestic exporters. This in
securities, specifically perpetual debt, would be called leading to a
turn is a negative for European exporters. The fact that we see
considerably price appreciation. In Ireland as the Sovereign underper-
continued issuance by high grade corporate is encouraging how-
formed ahead of the auction this week we saw CDS levels touch news
ever we await more issuance by lower rated companies and more
highs.
of a skew to Euro denominated issuance.
Corporate & Government Bonds
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2. Market Movers
Credit Spreads across Ratings by Sector Government Bond Yield Curves
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Ireland is trading considerably cheaper than the core
Credit spreads in percentage points across credit ratings for nations at present along with other peripherals.
each sector.
CDS Trends 10 Year Bund Technical View
CDS TRENDS
800
CS EES
600
D L VL
Inv GD
400 Sub Inv GD
Snr Fin
200
0
01-Apr-2010 01-Jul-2010 01-Oct-2010
Daily Levels
400
CS EES
D LVL
300 IRE
PRT
SP
200 ITA
100
Jun Jul Aug
Daily Levels
Sep Oct
Our longer term view for lower yields remains in tact. How-
ever we expect yields to consolidate into a trading range
Credit indices improved after Basel however pe- between 2.10% and 2.5% in the short term. Our bias is to
ripherals remained under pressure during the week trade this range from the sell side. Only a sustained trade
meaning that costs of protecting against default above 2.5% will change our longer term bearish outlook.
increased.
10 Year $ Treasury Technical View 10Year $ Treasury Technical View
Us 10 yrs traded in a relatively tight range last week as the mar- In the short term we expect the period of consolidation to
ket is consolidating between 2.50% on the downside and 2.90% continue. We still favour trading yields from the sell side
on the upside. Within this range we favour trading yield from the but favour selling rallies while yields are below 3.20%. A
sell side. A move above 2.90% would alter our short term bearish move above resistance at 3.20% will force us to alter our
outlook. bear bias.

3. Bond of the week
Heidelberg 7.5% 2014 20th Sept 2010
Issuer Heidelberg Cement • HEI Net debt in 2010 is 7.8bn
Rating B1/BB-
Risk High • Net debt to EBITDA is at 4.16 times
Currency Euro
• Cash-flow for this year is 1.1bn, so the cash
Maturity Oct 31st 2014 generation of the company is good.
Callable N/a
Collateral Company Guarantee • Very high level of leverage in the company mainly due to the purchase
of Hanson in 2007.
Coupon 7.5%
• As a credit, exposure to emerging markets makes this a strong pick by
Coupon Type Fixed many market analysts. It currently has 25 buy recommendations and
Coupon dates Annually, April 30th 2 sell on Bloomberg
Issue size 1 billion • The bond itself has performed very well over the past few months re-
turning over 6% in price terms since the beginning of June.
Price (1) 107.0 • Management have indicated that they are aiming to restore the previ-
Yield to call Not applicable ously held ‘Investment Grade’ status on debt have are reducing lever-
GRY (2) 5.6% age levels. As such we feel that there is more upside in these Heidel-
berg Bonds.
• 5-Year yield on the HEI bond is 5.6%. Its credit rating is B1 with a positive outlook. This is below investment grade.
• HEI is aiming to regain its investment grade rating in the next year and current opinions by rating agencies have been positive about this company’s ability to
achieve this.
• The group also has greater exposure to Asia and Australasia compared to CRH and this is a positive. US exposure is lower than CRH' at 30%.
s
(1) This is the clean price, excluding accrued interest. The value of fixed rate bonds increase as interest rates fall.
(2) GRY—Gross Redemption Yield; Yield to maturity assuming all interest payments are reinvested at the same rate
75 St. Stephen’s Green, Dublin 2, Ireland. Tel : +353 1 633 3800. Fax : +353 1 662 3737/677 7044. email : info@dsl.ie, web : www.dolmenstockbrokers.ie
LIMERICK: Theatre Court, Lower Mallow Street, Limerick. Tel: 061 436500. CORK: Dolmen House, 45 South Mall, Cork. Tel: 021 422 2122.
Dolmen Securities is a Member Firm of the London Stock Exchange and is regulated by the Financial Regulator. Dolmen Stockbrokers is a Member Firm of the Irish Stock Exchange, the London Stock Exchange, and is regulated by the Financial Regulator.

4. Corporate Interest Rate Comment
8th December 2008
20th September 2010
1 2 1 2 3 6 9 1 3 5
overnight
Week Week Month Month Month Month Month Year Year Year Graphs
AIB 0.57 0.63 0.67 0.75 0.93 1.20 1.35 1.50 EUR
3mth Interest Rates '06 - '10 EUR Futures
Anglo 2.00 2.50 3.00 3.10 3.15 3.35 4.15 4.50 7% GBP
GBP Futures
Bank of Ireland* 1.00 1.70 2.50 2.45 2.50 2.06 6%
USD
USD Futures
Bank of Scotland 0.37 0.67 0.70 0.85 0.98 1.40 1.65 1.79 1.92 2.43 2.87 5%
EBS 2.00 2.10 2.50 2.90 3.00 3.15 3.25 3.88 4.30
4%
Investec 1.50** 3.00 3.00 3.00 3.00
3%
Irish Life & Permanent 1.00 1.50 1.75 2.25 2.50 2.75 3.00 3.00 3.25 3.25 4.00
2%
Irish Nationwide 1.00 1.75 2.00 2.40 2.60 3.00 3.00 3.15 3.30
1%
National Irish Bank* 1.11 1.21 1.37 1.64 1.79 1.92 2.55 0%
06
7
08
9
10
06
08
0.40 0.52 0.76 0.84 1.01 1.33 1.48 1.61 1.68 2.12
-0
-0
n-
p-
n-
p-
n-
Zurich
ay
ay
Ja
Ja
Ja
Se
Se
M
M
*Rates are based on 365 day basis. All others are based on 360 day basis **One month notice account EUR
3mth Interest Rates '99 - '10 EUR Futures
GBP
Comment 8%
7%
GBP Futures
USD
USD Futures
Deposit rates in general continue to attract very little movement either positive or negative, with the exception of Bank of Ireland who have increase their 3 /
6 / 9 & 12 month rates considerably from 1% / 1.3% / 1.6% / 1.8% to 2.5% / 2.45% / 2.5% / 2.06%. Although these rates see significant improvement over 6%
normal Bank of Ireland’s rates, they are still not attracting the higher levels of other deposit takers. IL&P maintain their recently increased rates but Anglo and
5%
Irish Nationwide continue to top the table between them out to 12 months. EBS are coming to the end of their step up account trench which closes on 20th
September. The rate on this account increases progressively at quarterly intervals and offers a blended rate of 3.01% with access every three months. 4%
Longer term rates have seen an improvement and both EBS and Anglo have increased their offering. Anglo again top the table in this category with a three
year rate of 4.15% and a five year rate of 4.50%. 3%
2%
Disclaimer: The above rates refer to corporate deposit rates and may vary depending on the level of deposit placed with the various institutions. The
above table is intended as a guide and private clients should be aware that there are specific rates available through the institutions for non corporate funds. 1%
These rates will be based on the amount and term of the deposit and should be discussed directly with the relevant institution. If you wish to discuss this or
any other liquidity / deposit needs please contact Daragh Cullinan on 01 633 3695 / daragh.cullinan@dsl.ie. 0%
0
2
4
6
8
9
99
1
01
3
03
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05
7
07
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09
11
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20
ar
ar
ar
ar
ar
ar
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No
No
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19
75 St. Stephen’s Green, Dublin 2, Ireland. Tel: +353 1 633 3800. Fax: +353 1 633 3856 / 633 3857. email: info@dsl.ie, web: www.dolmenstockbrokers.ie LIMERICK: Theatre Court, Lower Mallow Street, Limerick. Tel: 061
436500. CORK: Dolmen House, 45 South Mall, Cork. Tel: 021 422 2122. Dolmen Securities Limited is a Member Firm of the London Stock Exchange. Dolmen Securities Limited is regulated by the Financial Regulator.

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75 St. Stephen’s Green, Dublin 2, Ireland. Tel : +353 1 633 3800. Fax : +353 1 662 3737/677 7044. email : info@dsl.ie, web : www.dolmenstockbrokers.ie
LIMERICK: Theatre Court, Lower Mallow Street, Limerick. Tel: 061 436500. CORK: Dolmen House, 45 South Mall, Cork. Tel: 021 422 2122.
Dolmen Securities Limited is a Member Firm of the London Stock Exchange. Dolmen Securities Limited is regulated by the Financial Regulator.Dolmen Stockbrokers is a Member Firm of The
Irish Stock Exchange and The London Stock Exchange. Dolmen Stockbrokers is regulated by the Financial Regulator.