First sale of Irish bonds since 2010


PRIVATE INVESTORS bought Irish Government bonds yesterday for the first time since September 2010. The National Treasury Management Agency sold just over €3.5 billion worth of three-year debt.

The new bonds were offered to investors holding €11.8 billion of outstanding bonds maturing in two years. The fact that about one-third of those investors agreed to the “switch” to longer-dated bonds “demonstrated investor appetite for Irish Government paper and will support our plans for a phased re-entry to long-term debt markets”, the NTMA said.

The rate of interest offered was just under 5.2 per cent, only marginally higher than the bonds it repaid.

It is the first time any of the three euro zone economies in EU-IMF bailouts have succeeded in selling bonds of this maturity. The re-entry to the market follows a six-month trend decline in yields on Irish Government debt. In recent weeks yields have fallen close to the levels of Italy, the weakest euro zone economy not in a bailout.

Yesterday’s bond sale served a dual purpose: to test market demand for Irish Government bonds and to reduce the size of the repayments due in January 2014. The latter was considered important because the single repayment of €11.8 billion in two years was unusually large. It would also have taken place just as the Government is scheduled to exit the bailout. Yesterday’s operation lowers the January 2014 hurdle.

A spokesperson for the European Commission in Brussels said the result of the bond auction was “encouraging as it shows increasing confidence among investors in the strong commitment of the Irish authorities to redress the situation and fully implement the EU-IMF programme. The result is particularly positive as the maturity is well beyond the end of the programme.”

Barry Nangle, head of bonds at stockbroking firm Davy, the only Irish dealer of the Government’s bonds, said the “significant majority of investors switching were the Irish domestic banks”.