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Dublin: 13 °C Wednesday 1 October, 2014

Ireland sells first 10-year government bonds since before bailout

The NTMA planned to raise about €3bn in an auction – but got bids for over four times as much, leading to the sale of €5bn.

Image: Photocall Ireland

IRELAND HAS SOLD its first 10-year government bonds since before its entry into the EU-IMF bailout programme.

An auction held this morning, in which the National Treasury Management Agency had hoped to raise €3 billion through the issuance of new 10-year bonds, led to the sale of €5 billion in bonds.

The auction met with enthusiasm from investors, however, with Bloomberg saying that the government had received bids from lenders willing to offer a total of €12 billion – four times more than the NTMA was looking to raise.

The high volume of bids for the Irish bonds led the agency to sell €5 billion of bonds instead of the €3 billion it had originally planned.

The bonds are reported to have been sold at an average yield of between 4.25 and 4.3 per cent. An official average interest rate will be confirmed later today.

The last time Ireland auctioned off a new long-term bond, in September 2010, it paid interest of 6.023 per cent to borrow for eight years – and 4.767 per cent to borrow for four years.

After that auction, the Irish government decided to cancel its remaining auctions – and with the cost of borrowing on second-hand markets escalating, Ireland was eventually forced to borrow from the EU and IMF with penal terms and conditions.

The auction of a new 10-year bond will be seen as a positive step in helping Ireland return to independent financing on the bond markets, without having to take money from the EU and IMF.

The yield paid by Ireland is still significantly higher than those of stronger European countries, however: Germany would pay only 1.46 per cent interest for a 10-year loan, while the UK would be asked for 1.95 per cent and France would pay 2.09 per cent.

Spain, however, would be asked to pay 4.77 per cent – while Italy, which remains in a political vacuum following inconclusive election results, would pay 4.72 per cent.

Portugal, which like Ireland is in an EU-IMF programme, would pay 5.93 per cent to borrow – a rate high enough to deter the government from looking to borrow – while Greece would pay 10.68 per cent.

Read: NTMA announces issue of new 10-year bond ‘in due course’

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