State to tempt markets with €2bn bond deal

Ireland may bring its first syndicated sovereign deal since 2010 to the markets as early as today, as the National Treasury Asset Management Agency (NTMA) looks to take advantage of positive investor sentiment to raise an expected €2 billion.

The last time Ireland raised funds through a syndicated deal – which differs from an auction in that the price is pre-agreed – was before the EU-IMF bailout programme of December 2010.

Yesterday the NTMA announced that it would seek to raise new money in the “near future”, but it is understood that the deal, which is a syndicated tap of its 2017 Treasury Bond, could get away as early as today.

Institutional investors

The deal will open up the 2017 bond to institutional investors at a pre-determined price and a five-year term through mandated joint lead managers, Barclays, Danske, Davy, RBS and Société Générale.

It is expected the deal will be priced in or about the 3.25 per cent range.

“The 2017 bond has been very tight in the repo market for the last few months and this should help increase liquidity in the issue. The current issue size is € 3.89 billion and the issue last traded at circa 3.25 per cent in yield terms (having traded at 3.15 per cent just prior to the announcement),” said Jim Ryan, a of Glas Securities.

Given that Ireland’s average cost of bond funding was circa 4.7 per cent prior to entering the bailout, to fund at such a level is a remarkable turnaround. It also represents a level lower than that which Ireland is borrowing from the Troika, about 3.5 per cent.

“This is a very pleasing outcome for the NTMA and the Irish authorities,” added Mr Ryan.

The deal also edges Ireland closer to fiscal sovereignty.

“I think it’s more likely than not now,” said Mr Ryan of Ireland’s chances of exiting the bailout later this year, although he added there were “still a few hurdles to cross”.

Owen Callan, senior fixed income strategist at Danske Bank Markets, said the deal “marks a massive step in Ireland’s long process of fully regaining long term bond market access and fully normalising its primary market issuance, in 2013”.

Once the deal gets away successfully, analysts expect there will be one or two more syndicated bond issuances during the course of the year.

Ireland has a funding requirement of about €10.5 billion in 2013.