State ponders return to long-term bond market

Speculation is mounting that Ireland may make its return to the long-term bond markets for the first time since September 2010, with the National Treasury Management Agency (NTMA) potentially taking advantage of investor appetite to get a deal away before Christmas.

“It’s an opportunity worth seizing,” said Ciarán O’Hagan, head of euro zone rates strategy with Société Générale in Paris, noting that yields have fallen to quite low levels and are “attractive” once more.

“There’s a huge well of sympathy for Ireland’s story,” he said, adding: “If Ireland gets a deal done successfully, it will boost confidence significantly.”

Last week, the NTMA successfully got away its latest monthly treasury bill deal, a €500 million transaction which was oversubscribed by 4.12 times. The bills, which have a maturity of three months, were sold at a yield of 0.55 per cent.

A long-term bond issuance is a very different prospect, however, and with December a quiet month for the bond markets, the NTMA might opt to hold off until January.

According to Stephen Lyons, credit analyst with Davy, it is unlikely that the NTMA will go to the market this side of the new year.

“In the new year, all options are open to the sovereign in terms of size of issue, its maturity and the currency given the demand for Irish bonds,” he said.

But the NTMA may not want to wait too long. According to Mr O’Hagan, there is an opportunity for Ireland to issue “at the moment”. If bad news emerges from another peripheral country, such as failure to agree on a Greek deal, it could hinder its chances.

Dollar bond

There has been some suggestions that Ireland could consider a dollar bond. According to Mr O’Hagan, this will depend on investor demand.

If Ireland does return to the bond markets, it will follow in the footsteps of the ESB and Bank of Ireland, which successfully tapped international bond investors recently.

Mr Lyons suggested AIB might look to “capture the momentum of BofI’s successful covered bond issue” and look to access the markets.