IRELAND SOLD €1.5 billion in bonds yesterday at the lowest spread since 2008.

In an auction yesterday, the National Treasury Management Agency (NTMA), which manages the State’s debt, sold €500 million of a bond maturing in 2016 and €1 billion of a 10-year paper.

The yield of 4.426 per cent, at which the benchmark 10-year 2020 bond was sold at the auction, represented the smallest premium over the equivalent in safer German government bonds since December 2008, the NTMA said. Moreover, it was 1.58 per cent below the peak spread in March 2009.

Commenting on the bond issuance, Minister for Finance Brian Lenihan said the lower spread indicates the level of international confidence in the State’s prospects. “There is room for further improvement in our spreads,” he said.

The NTMA has already reached just over half its 2010 bond sale target of €20 billion and stands in marked contrast to fellow euro zone struggler Greece, which needs to refinance some €20 billion of debt scheduled to mature by May.

Analysts said the appetite for Irish bonds was particularly impressive given EU finance ministers on Monday announced standby plans to provide Greece with financial assistance if needed. “Demand seems very strong. It’s a positive sign for Ireland Inc,” chief economist at Goodbody Stockbrokers Dermot O’Leary said.

Together with a syndicated issue of €5 billion of 10-year bonds in January, two previous monthly auctions and other small sales, Dublin has sold €10.2 billion worth of bonds this year.

“It’s a pretty solid performance. There is pretty high demand for 2016, but demand for the longer term bonds is solid as well,” said Peter Dixon, analyst at Commerzbank. “It would appear that the markets are convinced by the Irish Government’s measures and what they did in December.”

Ireland has about €1 billion in bonds maturing this year and the NTMA has said it might issue more than the €20 billion scheduled to prepare funding for debt worth up to €6 billion due in 2011.

John Corrigan also said he was considering the possibility of a 30-year bond, which would be arranged through syndication, on top of the remaining scheduled auctions running until November. (Additional reporting – Reuters)