Managing the debt
In the financial world, market timing is difficult to achieve, either when selling debt in the bond market or raising money in the stock market. However, the success this week of the National Treasury Management Agency (NTMA) in selling €2.5 billion of new sovereign debt at a competitive price, suggests good timing and astute debt management.
In one bond offering, the NTMA has raised one-quarter of the €10 billion funding target set for 2013. The issue was almost three times oversubscribed, which reflects both positive investor perception of Ireland’s economic performance and increased international confidence in the country’s growth prospects. The successful sale confirms a keen investor interest in Irish sovereign debt, which augurs well for future fundraising efforts at what is a critical stage on the road to economic recovery.
For the Government, its six-month presidency of the European Union has raised Ireland’s international profile at an opportune time: the year in which Ireland hopes to leave the EU-IMF bailout programme, and to regain fiscal sovereignty. The success of the NTMA’s fundraising serves to underline the credibility of the Government’s aim. The yield – interest rate – payable on the latest bond offering is lower than the average cost of borrowing under the bailout programme.
But whether Ireland can successfully exit the bailout programme later this year will depend greatly on the European response to two key Government concerns: a lowering of the debt servicing costs of the promissory notes, and some reduction in Ireland’s sovereign debt burden, which soared following the State’s rescue of the banks. The IMF has said Ireland deserves a deal on its debt. And on Wednesday, both European Commission president José Manuel Barroso and European Council president Herman Van Rompuy reaffirmed their support for such a deal. Mr Barroso, helpfully, suggested the Irish presidency was an opportunity to make Ireland’s case better known. The Government should now act on his advice.