Ireland’s borrowing costs fall as confidence rises

IRELAND’S borrowing costs fell at an auction of €1.2 billion ($1.6bn) of six and eight-month bills, as efforts by the Government to cut its budget deficit helped boost investor sentiment.

The country sold €650 million of securities due January 14, 2011, at an average yield of 1.367%, the National Treasury Management Agency said. That compared with 1.565% at a July 8 auction of the same bills.

Ireland also issued €550m of securities due March 14, 2011, at an average yield of 1.8%, compared with 1.898% on July 8.

“Sentiment has improved and it reflects in yield spreads and auction results in the euro region,” said Huw Worthington, of Barclays Capital in London.

“This auction went very well, and the debt agency sold the bills at good rates.”

While Ireland has raised taxes and cut public workers’ pay to reduce its budget deficit, the cost of aiding banks is adding to pressure on its public finances.

Moody’s on July 19 cut its rating on Ireland’s debt by one level to Aa2, citing “contingent liabilities from the banking system”.