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Ireland's €500m government debt sale goes better than expected

Minister for Finance welcomes auction of Treasury Bills which fetched a 1.8 per cent yield.

THE NATIONAL TREASURY Management Agency has auctioned €500 million in short-term government debt on the international financial markets for a better yield than expected.

Conducted on the Bloomberg Auction System, the three-month Treasury Bills fetched a yield of 1.8 per cent – beating the 2 per cent expected. The offer was oversubscribed, as anticipated.

Minister for Finance Michael Noonan has welcomed the successful auction as a “very important milestone on Ireland’s continuing path to recovery”.

He claimed today’s auction shows that the markets have “reacted positively” to the government’s economic programme “and the decision taken at last week’s [eurozone] summit to break the negative links between the sovereign and the banks”.

“The Government is focused on emerging from the programme and returning to the markets next year,” the minister said after the sale. “Today’s return to the Treasury bill market is a small but a very important first step in this regard and we will continue to take the necessary measures to fully implement our programme and reduce our deficit in line with commitments.”

Prepared

“It’s very rare that you would go to the market for a failed auction,” Peter Browne from the Institute of Financial Training has told RTÉ’s Today with Pat Kenny.

However, Browne cautioned that selling a three-month treasury bill is a very different matter to selling ten-year bonds. ”The sort of investor who buys this is totally different to the traders who buy five- and ten- year bonds,” he said, and cautioned against “reading anything into this as bringing Ireland closer to returning to the bond market”.

It’s a toe in the water and a step in the right direction, though, he added.

Owen Callan, senior dealer at Danske Markets, also gave a cautious welcome to today’s Treasury Bill sale. He says that while the sale has gone well for the NTMA symbolically, “if we are to expect a full return to the long-term debt markets later this year, political and economic stabilisation in the eurozone, and signs of recovery in the domestic economy, are required”.

The T-Bills sold today are due to reach maturity on 15 October 2012. Interest is not paid on the Bills during their lifetimes; the government must pay their full value when they reach maturity.

Ireland returns to the markets today – here’s what you need to know >

Explainer: Everything you wanted to know about the bond markets but were too afraid to ask>

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52 Comments
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    Mute Kerry Blake
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    Jul 5th 2012, 11:19 AM

    And so the spin begins. Even Greece can sell 3 month t-bills ffs!!

    75
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    Mute dominic hoffmeister
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    Jul 5th 2012, 11:23 AM

    Can they?

    78
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    Mute Dermot Mc Loughlin
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    Jul 5th 2012, 11:30 AM

    Yes they can and have done so recently.

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    Mute Bilbo Baggins
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    Jul 5th 2012, 11:32 AM

    yes they can. they and we are garunteed by a bailout beyond the next 3months so its garunteed money for the investor. garunteed 1.8% on your capital in 3months, easy money.

    57
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    Mute Kevin O Brien
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    Jul 5th 2012, 11:32 AM

    More importantly, what percentage does Greece pay on its t-bills?

    23
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    Mute David Mc Weeney
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    Jul 5th 2012, 11:38 AM

    All this craic about Ireland “returning to markets today”…a complete mis-direction!

    It’s NOT the bond market,It’s 30-90day T-BILL! Even Greece are doing that, and the situation they’re in! Really canNOT read much this about re-entering 10year bond market.

    52
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    Mute tomnewnewman.org
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    Jul 5th 2012, 12:42 PM

    Do I detect ”Looking for the Negative Syndrome” amongst some commentators.

    62
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    Mute Ignoreland
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    Jul 5th 2012, 2:37 PM

    @Kevin O’Brien, Greece’s T-Bills were auctioned at over 4.6% in May. Back in December, Spanish T-Bills were at 5.11% whereas Portugal’s went for 4.89%. So relatively speaking Ireland did quite well today.

    53
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    Mute Paul Mallon
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    Jul 5th 2012, 5:08 PM

    @tomnewnewman.org how about being realistic and countering the spin.

    2
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    Mute kingstown
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    Jul 5th 2012, 11:34 AM

    To hell with the naysayers – we’ll never get out of a recession with negative attitudes

    59
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    Mute Too Trueleft
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    Jul 5th 2012, 11:44 AM

    Thats right kingstown, its not growth, stimulus and investment that will get us out of recession, its attitude, the twin sister of the confidence that inda keeps harping on about.

    28
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    Mute Kenneth Sheehy
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    Jul 5th 2012, 12:31 PM

    There is a big difference between naysaying and being realistic about what has actually happened? It is clear that celebrating the ordinary, while refusing to demand more from our elected officials, is partially to blame for the current mess we find ourselves in. The sale of short term bonds is not an indicator of anything, but we are suppose to buy the government line about this being more than it is? Why? It is ridiculous that this wafer thin attempt to gather support is being pushed, to be honest.
    While I agree with your point about negativity being a partial hinderance to growth, at least superficially, we should never relish mediocrity or follow government spin, solely because the reality is less appealing to our media. This is a non story…

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    Mute Neil
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    Jul 5th 2012, 1:23 PM

    Too True Left, the government is already spending 15bn+ more on Education, Health, Social Welfare etc than it takes in taxes. Its borrowing that money from the troika.
    And you want to spend even more.
    Sounds great. But where oh where is the money coming from?
    The IMF? The bond markets?
    And at what interest rate?

    14
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    Mute Too Trueleft
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    Jul 5th 2012, 1:50 PM

    The interest rate is determined by what the markets perceive the likelihood of Ireland not being able to pay back it’s debts is, the higher the risk, the higher the interest rate money will be offered to us. Carrying the banking debt makes the risk far higher and as a result the interest rate. Decouple the banking debt from the soverign will reduce the risk and therefore the intereest rate.

    This is simple stuff neil, do try to keep up.

    6
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    Mute Niall McLaughlin
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    Jul 5th 2012, 11:21 AM

    Well that sounds like good news, so fair play. I have no economics background, so could someone explain why a country like Ireland as it is now couldn’t just repeatedly go for these three month auctions if the ten year bonds are potentially much riskier…?

    52
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    Mute Rónán O'Suilleabháin
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    Jul 5th 2012, 11:31 AM

    Because you have to pay the money back in 3 months, presumably with another 3 month bond. If you only used 3 months bonds, you’d end up having the entire national debt due, cumulatively, over a 3 month period. Not a good idea to be rolling over a 10-figure sum every months.

    A country needs to balance their debt between short term and long term bonds. For example, self-employed tax returns are in October. So Ireland under normal circumstances would issue short term bonds to get the money to keep paying the public sector before the tax windfall at the end of the year. Then a bunch of short term bonds would be cleared with the cash brought in.

    The NTMA’s job is to balance the day-day financial needs of the country against the mood of the market, what we think we can pay back when etc.

    That’s why we’re in the troika program, because the NTMA could no longer project safely into the future. We wouldn’t have had the day-day money to pay the high interest required on our 10 year bonds, and we’d have ended up with a virtually guaranteed default date set in stone when all the bonds started to become due (we may still have this). The troika programme takes away all of these worries as we have a certain sum guaranteed around a floating (though predictable) rate. So we don’t have to play the game.

    Most likely, today’s auction is a little tester at us getting back on our feet. Short term money to be paid back out of tax receipts later on. We’ll gradually get back on our feet with respect to short term borrowing to cover waiting for tax in november, but we’ll still need the troika to supply the longer term money for now, as we’re not a good enough bet yet, and we’ll have 10 year bonds coming due in the next few years.

    92
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    Mute Rónán O'Suilleabháin
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    Jul 5th 2012, 11:32 AM

    * 12-figure sum, not 10 figure sum!!!!

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    Mute Brian Mulligan
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    Jul 5th 2012, 12:57 PM

    A fine explanation Ronan O’Suilleabhain, not everyone understands these processes and you explained it well!

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    Mute Brian Mulligan
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    Jul 5th 2012, 12:57 PM

    and by ‘not everyone’ I meant me!

    39
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    Mute Niall McLaughlin
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    Jul 5th 2012, 2:53 PM

    Agreed, that was a really comprehensive explanation, cheers!

    19
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    Mute Reg
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    Jul 5th 2012, 11:23 AM

    There was an economist on the radio this morning warning not to get excited about this.

    36
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    Mute Dermot Mc Loughlin
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    Jul 5th 2012, 11:27 AM

    In FG’s twisted view this means austerity is working, give us hell Noonan.

    35
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    Mute David Higgins
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    Jul 5th 2012, 12:16 PM

    And do you think people would lend to us if we weren’t trying to close our deficit?

    40
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    Mute Too Trueleft
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    Jul 5th 2012, 12:28 PM

    Yes…..if we lose the bank debt…..you know, the stuff your dear leader stated in the dail that he wasn’t looking for a writeoff of..

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    Mute Dermot Mc Loughlin
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    Jul 5th 2012, 12:47 PM

    Not having holidays in Rio costing 10k from public finances might help too.

    Closing the deficit – the new term for cuts in health and education, ©FG. 2012.

    22
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    Mute Neil
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    Jul 5th 2012, 1:19 PM

    Gotta laugh at the likes of Too True left who say the deficit is just because of the bank debt!
    90% of the deficit is the government spending more than it takes in taxes.

    40
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    Mute Dermot Mc Loughlin
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    Jul 5th 2012, 1:40 PM

    Funny how the likes of Neil and the like reckon the forced bank debt is only a minor player in our downward spiral…10% eh?
    How much of the deficit is due to TD’s stupid wages then?
    How much closer would we be to economic parity if TD’s paid their own f***ing phone bills, bought their own f***ing shoes, filled their cars with their own f***ing money and accepted that their wages and expenses are unsustainable…???
    We can’t afford our TD’s, especially TD’s who preach austerity yet remain…and will continue to remain well insulated against the austere policies they’re pursuing.

    15
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    Mute Too Trueleft
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    Jul 5th 2012, 1:55 PM

    Neil, can you point us to where, on this or any other thread, I have claimed ” the deficit is just because of the bank debt”

    Take your time……..

    9
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    Mute David Whelan
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    Jul 5th 2012, 2:26 PM

    Ridiculous comment dermot (TD’s wages), get over yourself.

    20
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    Mute seamus mcdermott
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    Jul 5th 2012, 3:26 PM

    The market will reward the government that abuses the people.

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    Mute finbar m
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    Jul 5th 2012, 11:31 AM

    Excited about this ,, it’s just another 500 million on the bill no problem my kids and there kids will look after the bill ,, a 14 week loan we can not manage to pay

    21
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    Mute Bilbo Baggins
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    Jul 5th 2012, 11:35 AM

    we’ll pay it alright, with a 10year loan.

    27
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    Mute john g mcgrath
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    Jul 5th 2012, 11:35 AM

    It’s not earth shattering news 3 month t bills are easy enough to get away but welcome any way.
    On another note our10 year rate moved up this morning with spain getting 10 year bonds away at 6,54 nearly 50 points higher than last issue.
    Seems the respite was short lived .

    18
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    Mute fixtronix.ie
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    Jul 5th 2012, 1:00 PM

    This is all just trickery by #irlgov if you ask me. 3 month money at 1.8% is the same as a 7.2% annualised rate and that is well into unsustainable territory for any economy.

    16
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    Mute Donal McCarthy
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    Jul 5th 2012, 1:24 PM

    Eh, the 1.8% is the annual rate.

    Our Ten year bonds are currently paying 6.09%

    http://www.bloomberg.com/quote/gigb10yr:ind

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    Mute fixtronix.ie
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    Jul 5th 2012, 1:30 PM

    Hi Donal,
    The 1.8% is clearly the yield over 3 months, so it’s the same as 7.2%/yr.
    I am not talking about the current 10yr bond rate, I am just saying that 1.8%/3mts is no big deal in the overall scheme of things.
    See: http://www.ntma.ie/Publications/2012/IrelandSells500mofTreasuryBills.pdf

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    Mute Killian McDonagh
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    Jul 5th 2012, 1:39 PM

    Yields are reported on an annualised basis

    6
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    Mute fixtronix.ie
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    Jul 5th 2012, 1:53 PM

    The market convention for quoting a bond or T-bill equivalent yield for 3 months is to express the bond equivalent yield relative to the 365-day year rate.
    So, if you are correct and the 1.8% is the annual rate, then the 3month money is costing us 1/4 of 1.8%.
    But this is not in fact the case as the NTMA clearly states that 1.8% is the yield on the 3month term, which according the the standard market convention, means the annual rate is 7.2%

    7
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    Mute John Conniffe
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    Jul 5th 2012, 2:13 PM

    And that’s why it’s referred to as a discount of face value rather than a yield.

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    Mute Trev Mooney
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    Jul 5th 2012, 11:29 AM

    There was an economist on the radio this morning saying we should be excited about this….. Economists meh!

    16
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    Mute Barry Mahon
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    Jul 5th 2012, 11:43 AM

    yea, NAMA lends at a lower rate than 1.8, so why doesn’t NTMA use them when it wants to borrow?? More political optics.

    16
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    Mute Too Trueleft
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    Jul 5th 2012, 11:47 AM

    Because government needs to spin this as dipping our toes back in the markets in an attempt to imply their plan is working, all the while handing billions of our money to the banks. They could have done it cheaper, but now we have to foot the bill for the difference to give them their headline.

    But look…..theres a socialist TD spending €900 on petrol, STOP PRESS!!

    26
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    Mute Steven McTowelie
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    Jul 5th 2012, 12:38 PM

    If this is good news, I can’t wait till October when we borrow 509 million to pay this back. That will be great news!

    14
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    Mute Kenneth Sheehy
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    Jul 5th 2012, 12:07 PM

    ‘Better than expected,’ How? The government sold short term bonds, so the people buying them were not the buyers we need. Why then are we celebrating this, and allowing the government spin machine portray this as being more than it is? Perspective is crucial, and from reading many news sources today, it is clear that the governments line is being pursued, rigidly, by many journalists. We should not spin the mediocre. It will only lead to anger and disappointment, in the long run.

    14
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    Mute Martin Grehan
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    Jul 5th 2012, 12:50 PM

    When a person “sells their debt” to the bank it’s called a loan. When a country does it we call it a bond. Sounds so much less threatening than “Ireland goes to money markets for another loan”. Whole markets based on a fiction. If all these debts were called in on one day whole financial system would collapse. Does half this money even exist or have a connection to the real world? Who knows.

    12
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    Mute Barry Mahon
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    Jul 5th 2012, 12:59 PM

    It doesn’t “exist” except as numbers on a screen or a spreadsheet. Your comment about collapse is correct, that is why “we are where we are” Banking, writ large, is a unique business, you can make the most enormous bollox of it and the taxpayer rides to your rescue.

    6
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    Mute PeeedOff
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    Jul 5th 2012, 11:59 AM

    500 million over 3 months, is not testing anything, get them to try for a couple of Billion on a 5 or 10 year bond….Watch that sucker gain interest…!!!!

    Our whole economy is in the toilet…Just waiting for Merkel, Edna & co to flush it…!!!!

    10
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    Mute Killian McDonagh
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    Jul 5th 2012, 1:27 PM

    This bond issue was always going to go well. There is virtually no chance that the Irish Government is going to default on its first bond sale in a few years. If it was sale of 5 or 10-year bonds it might not have gone so well!

    9
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    Mute Paul
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    Jul 5th 2012, 1:56 PM

    Correct me if I’m wrong. The tax returns were up 500 million and the bond auction generated another 500 million. Does that mean were up 1 billion in the short term?

    5
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    Mute Chris Mcdonnell
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    Jul 5th 2012, 4:38 PM

    Not that means we have just about covered the bond paid to bankers last week. nNoonan on a trade mission testing the water to see if the Irish people can each sell a kidney to offset some of the anglo debt?

    1
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    Mute finbar m
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    Jul 5th 2012, 11:59 AM

    Very good point Barry , why don’t we keep it in house was it not the bond Market that got very thing screwed up in the first

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    Mute bob
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    Jul 6th 2012, 2:15 AM

    so were f++ked and will be for a long time,but while you all whither away in your so grand explainations on how the figures add up,where the Feck were ye when arseholes were f+cking this country??? talking the same shite,that’s where!!! now pop down to the local hospital children’s ward and explain this to them!!! tossers!

    1
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