Irish yields hit record low as regular debt sales to resume

Ireland's bond yields hit record lows today, only a day before the National Treasury Management Agency returns to market with its first regular bond auction since exiting an international bailout in December.

The NTMA aims to raise €1 billion in an auction of 10-year bonds tomorrow, three months after Ireland became the first euro zone country to exit an EU/IMF bailout.

Irish 10-year yields fell 4 basis points on the day to 3.01 percent, an all-time low, according to Reuters data.

Demand for Irish bonds gathered pace this year after ratings agency Moody’s in January upgraded the country’s debt to investment grade from junk. Thursday’s sale is expected to go well given the small amount of paper on offer.

"This is a reflection of the overriding theme of spread tightening in euro zone government bonds," said Michael Leister, a strategist at Commerzbank.

“But again given that Ireland has been leading the pack in that sense the scope is rather limited as investors might now opt for govvies with a bit more (yield) pickup like Italy and Spain and probably even Portugal.”

Irish 10-year yields have tumbled from levels close to 15 percent at the peak of the euro zone debt crisis in 2011 as brighter economic prospects in the currency area have prompted investor to seek higher returns.

Sentiment in peripheral euro zone bonds remained upbeat even as growth and credit concerns in China prompted investors to trim their exposure to riskier assets such as equities and scramble into top-rated government bonds.

Comments by European Central Bank policymakers affirming the bank was ready to ease policy further if warranted, underpinned demand for most euro zone bonds.

Elsewhere, Italian 10-year yields were flat around 3.4 per cent as Rome drew robust investor interest for a new 10-year inflation-linked bond today despite expectations euro zone price pressures will remain depressed.

German 10-year yields fell 3.5 bps to 1.61 per cent and a sale of €3.3 billion of two-year bonds drew strong demand, spurred by concern over slowing growth in China.

Yields on Dutch, Austrian, Finnish and French bonds were also lower. Comments by European Central Bank Executive Board member Peter Praet today that the central bank was ready to use non-standard policy measures to deliver stable prices helped the rally in top-rated bonds.

Praet’s comments followed remarks yesterday by ECB vice president Vitor Constancio that markets, rattled last week after the ECB refrained from easing monetary policy, had missed the central bank’s emphasis on slack in the economy. (Reuters)