State raises €1.5bn in bonds as fiscal efforts soothe markets

THE GOVERNMENT raised €1.5 billion in a bond auction yesterday as efforts to sort out the fiscal and banking problems eased the bond markets concerns.

The National Treasury Management Agency (NTMA), which had already reached half of its full-year fundraising aim by March, sold €750 million of a six-year bond and the same amount of a 10-year paper first issued by syndication in January.

In contrast to fellow euro zone struggler Greece, Ireland does not face any major refinancing hurdles this year and should have comfortable reserves to repay bonds maturing in 2011 if the successful fundraising drive of the past year continues.

“Today’s result is another vindication for the Government and the fiscal austerity measures they’ve taken and the measures to tackle the banking sector,” said Alan McQuaid, chief economist at Bloxham Stockbrokers.

Yesterday’s result brings the NTMA up to 59 per cent of its €20 billion full-year bond issuance plan.

“Ireland seems to be getting a lot of kudos for the fact that it is perceived to have taken very aggressive fiscal action,” said Dan McLaughlin, chief economist at Bank of Ireland.

In the first auction since the launch of Nama and an associated bank recapitalisation package in late March, the yield on the 2016 bond auctioned rose slightly from last month’s sale and the bid-to-cover ratio fell to 3 from 4.5 in March.

With up to €22 billion of capital injections earmarked for nationalised Anglo Irish Bank alone over a number of years, analysts have warned that the borrowing level in 2010 could come in above the original €20 billion target.

– (Reuters)