NTMA raises €1.5bn in bond sale

The National Treasury Management Agency has raised €1.5 billion in a bond auction today.

The fifth monthly auction of Government bonds received total bids of €4.6 billion, more than three time the amount on offer.

Some €750 million of the 4.0 per cent bond due to mature in 2014 was sold at an average yield of 3.11 per cent, and the remaining €750 million was issued in the 4.5 per cent bond maturing in 2020, with a yield of 4.72 per cent.

This compares to a February sale, when the average yield on 4 per cent 2014 debt was 3.03 percent. In March, the 4.5 per cent bonds maturing in 2020 yielded 4.43 per cent.

"Given the backdrop to this latest Irish bond auction, we believe the NTMA will be quite pleased with the result even though it ended up paying a higher yield than in earlier auctions," Bloxham economist Alan McQuaid said.

"Ireland now appears to be getting 'tarred with the same brush' as the likes of Greece and Portugal, which suggests that the NTMA may well end up paying higher interest rates to raise funds at the remainder of this year’s scheduled monthly auctions."

Today’s auction was the first real test of the market since the Greek economic turmoil intensified and the EU agreed a €750 billion fund to stem the euro zone sovereign debt crisis. The NTMA said last month it was considering not proceeding with this month's auction if the market volatility sparked by the Greek debt crisis persisted.

Minister for Finance Brian Lenihan welcomed the auction results.

The NTMA has now raised a total of €13.2 billion, or 66 per cent of the its fundraising programme for the year.

"This is not about the sovereign at this juncture, but more about sending out the right signal to markets to leave the door open for the domestic banks to raise required funding. Sorting out the banks' funding issues should as a result take the pressure off the Government's finances, which would then in turn be eventually reflected in lower bond yields," said Mr McQuaid.

The NTMA said today it had cash balances of more than €20 billion in addition to today's fundraising.