Bond auction raises €1.5bn

The National Treasury Management Agency (NTMA) sold €1.5 billion of bonds in an auction today, it said in a statement today.

The sale of a 4.6 per cent 2016 bond and a 4.5 per cent 2020 bond was expected to raise between €1 billion and €1.5 billion.

The auction was the third auction of a series of planned monthly bond auctions as part of the NTMA's €20 billion funding programme for 2010.

Total bids for the issue were €4.915 billion, 3.3 times the amount on offer.

The 4.6 per cent treasury bond for 2016 was oversubscribed 4.5 times the amount allocated, while €1 billion of the 4.5 per cent bond for 2020 was issued, with bids of 2.6 times the allocated amount received.

The 2016 bond was sold at an average yield of 3.479 per cent while the 2020 bond was sold at an average yield of 4.426 per cent, the smallest premium over the equivalent in safer German government bonds since December 2008, the NTMA said.

The 10-year Irish/German bond yield spread remained close to pre-auction levels of around 130 bps, while the Greek/German spread fell about 10 bps to 299 bps..

"Today was going to tell a lot in terms of Ireland's debt. Demand seems very strong. It's a positive sign for Ireland Inc," Dermot O'Leary, chief economist at Goodbody Stockbrokers, said.

Bloxham economist Alan McQuaid said the NTMA was in a "very comfortable and enviable position".

"As we have said on numerous occasions recently, one has to admire the NTMA's opportunism in exploiting the current goodwill towards Ireland within the financial markets that appears evident following the fiscal austerity measures announced in the December Budget. Indeed, the indications are that the NTMA will try to raise as much as possible in 2010 and pre-fund some of next year's expected funding requirement, which at this stage looks like being about €22 billion," he said.

He said despite the EU's apparent willingness to help bail out Greece if its budgetary position deteriorates further in the coming months, there was a risk that the "non-core" euro zone countries would be viewed the same as Greece.

"This would then lead to a significant widening of bond yield spreads over Germany going forward. Therefore, the NTMA's decision to 'strike while the iron is hot' is a positive step, significantly easing the funding burden over the remainder of 2010," he said.

"The onus is now on the Government to do its bit, and continue with the correct fiscal austerity measures to tackle the budget deficit. If the Government can do that and send out the right signals in the process, then the NTMA's job will become easier, and Irish government bond yield spreads over Germany will narrow further."

Bloxham economist Alan McQuaid said the NTMA was in a "very comfortable and enviable position".

"As we have said on numerous occasions recently, one has to admire the NTMA's opportunism in exploiting the current goodwill towards Ireland within the financial markets that appears evident following the fiscal austerity measures announced in the December Budget. Indeed, the indications are that the NTMA will try to raise as much as possible in 2010 and pre-fund some of next year's expected funding requirement, which at this stage looks like being about €22 billion," he said.

He said despite the EU's apparent willingness to help bail out Greece if its budgetary position deteriorates further in the coming months, there was a risk that the "non-core" euro zone countries would be viewed the same as Greece.

"This would then lead to a significant widening of bond yield spreads over Germany going forward. Therefore, the NTMA's decision to 'strike while the iron is hot' is a positive step, significantly easing the funding burden over the remainder of 2010," he said.

"The onus is now on the Government to do its bit, and continue with the correct fiscal austerity measures to tackle the budget deficit. If the Government can do that and send out the right signals in the process, then the NTMA's job will become easier, and Irish government bond yield spreads over Germany will narrow further."

Additional reporting - Reuters