State raises €500m in markets
The Government has raised €500 million in a debt auction today, in its first sale of Treasury bills since before the State sought a bailout.
The auction met its target, and had a yield of 1.8 per cent and a bid to cover ratio of 2.8.
The head of the National Treasury Management Agency John Corrigan said three or four more auctions of short-term debt may be held before the end of 2012, ahead of a return to longer-term markets early next year.
Speaking on RTÉ Radio One this afternoon, Mr Corrigan said the "wider mood music" has improved significantly since a summit of EU leaders held last week.
The NTMA may also consider selling six-month bills following today's successful debt auction.
The agency also wants to sell a bond with a duration of two years and over, he said.
Analysts described the auction results as "positive", and Minister for Finance Michael Noonan said it was an important step for the economy.
"This morning’s successful auction of three-months treasury bills by the NTMA was a very important milestone on Ireland’s continuing path to recovery," he said. "The yield on the bonds at 1.80 per cent was very competitive to its peer group, market commentators were agreed that any level lower than 2 per cent would be considered a good result, and demand was strong amongst investors."
The Irish auction was in contrast with Spain's debt sale, which also took place today. Most foreign investors are shunning Spain's auctions, even though Madrid has avoided going to international lenders for a full sovereign bailout.
The Spanish Treasury paid the highest rate in over seven months to borrow 10-year funds, suggesting the positive effect of last weekend's agreement by euro zone leaders is wearing off.
Altogether, Madrid auctioned €3 billion in three maturities of bonds. It sold €747 million in the benchmark 10-year bonds at an average yield of 6.43 per cent, up from 6.044 per cent at the last such auction on June 7th.
Ireland's return to financial markets was conducted by the NTMA. It has not disclosed the exact break-down of domestic and international lenders who purchased the treasury bills.
Owen Callan, a senior dealer at Danske Markets, one of the primary dealers in Irish government bonds, said that there was only a “very small participation” by the domestic banks and insurers in the auction given the low yield, or interest rate, being offered to lenders. He estimated that the international investors accounted for between 90 and 95 per cent of the borrowings raised.