Ireland back in market with €500m treasury sale

The National Treasury Management Agency will auction a €500m three-month treasury bill tomorrow to pave the way for the issuance of longer dated debt in the first quarter of 2013.

Tomorrow’s auction is the Government’s first foray into the sovereign debt markets since the EU/IMF bailout was agreed in Nov 2010.

Merrion Stockbroker economist Alan McQuaid expects the rate on tomorrow’s treasury bill auction to come in at 3.50%-4%.

Following the announcement, NTMA chief executive John Corrigan said: “The resumption of treasury bill auctions follows an intensive engagement with investors both domestically and overseas during the past 18 months and marks an important first step in our phased re-entry to the capital markets.”

It is believed the NTMA will issue further treasury bill over the remainder of 2012 but it will be the first quarter of 2013 before it issues longer dated debt. Ireland is fully funded until the end of 2013 but faces significant debt rollovers during 2014 and 2015.

“The idea of issuing T-bills this year and longer dated debt next year is to build up credibility in the markets. There is no point waiting for the taps to run dry before we go back on the market,” says a source close to the agency.

Ireland is the only member of the eurozone’s bailout programme countries which has not been active on the short-term treasury bill market. Portugal and Greece have had a series of auctions over the past couple of years.

The NTMA has been on an extensive investor roadshow throughout Asia, Europe, the Middle East, and the US over the past 18 months. A source close to one of the primary dealers involved in tomorrow’s auction says there is a high level of international interest in the Irish treasury bill auction.

Portuguese and Greek banks using cheap funding from the ECB’s €1trn long-term refinancing operations were the main buyers of Portuguese and Greek short term debt.

Yields on 10-year Irish Government bonds trading on the secondary markets dipped over the past few days following the agreement at the EU Summit last week to use the EU’s stability mechanisms, the EFSF and the ESM, to directly recapitalise the region’s beleaguered banking system and buy up periphery sovereign debt on the secondary markets.

Moreover, Ireland is making good progress on its EU/IMF bailout programme. The troika is in Dublin to start its latest quarterly review.

“The Government had to get back on the markets at some stage, but it is obviously taking the view it is better to strike while the iron is hot,” says McQuaid.