NTMA tops up bond auction with further €101m debt sale

The State debt management agency has topped up the amount raised in a bond auction last week before Moody’s upgraded Ireland’s creditworthiness to an A rating on Friday for the first time in more than five years.

The National Treasury Management Agency’s quietly sold an additional €101 million of six-year bonds late last week, after auctioning €750 million of the notes on Thursday at a yield of 0.16 per cent, according to figures on the agency’s website.

While such top-up sales are not uncommon, it was the first by the debt agency since last September – before the country headed into a period of political uncertain before and after the general election.

Meanwhile, the market interest rate, or yield, on Ireland’s benchmark 10-year bonds fell yesterday after Moody’s came out in the early hours of Saturday morning to upgrade the nation by one notch to A3.

Proved wrong

Cantor Fitzgerald’s head of fixed-income strategy in Ireland, Ryan McGrath, said he was “happy to have been proved wrong” with Moody’s surprise upgrade.

He was among eight out of 11 economists and analysts polled by The Irish Times who predicted before Moody's announcement that it would hold off upgrading Ireland amid concerns over the UK's referendum next month over EU membership.

"The upgrade was long overdue, as it was almost two years since Moody's last Irish sovereign upgrade," said Mr Ryan, nothing that while the ratings firm had narrowed the gap with rivals, it still lagged Standard & Poor's, which rates Ireland A+, and Fitch, which has an A stance on the country.

Ireland’s 10-year bond yields fell more than 0.03 percentage points at one stage to below 0.77 per cent in early trading yesterday. They ended the session at 0.796 per cent, crucially below the 0.80 per cent level for the first time in five weeks.

Manageable risks

Moody’s said that the risk of the new Fine Gael-led minority government reversing “fiscal consolidation seen over the past several years is low”.

It also that while the prospect of the UK leaving the EU would have negative repercussions for Ireland, given the close economic ties between both nations, it said that the risks would be “manageable” for the Irish economy.

Welcoming the upgrade, Philip O'Sullivan, an economist with Investec in Dublin, said the move "bolsters the already positive case for Irish sovereign yields".

He said he expected that Irish bond yields would move further towards core euro-zone levels from here. The yield differential between Ireland’s 10- year bonds and similar German securities has fallen to 0.66 percentage point from 1.45 points two years ago.