S&P hopeful on return to bond market

THE Government may be able to borrow on international bond markets next year at affordable rates and not require fresh bailout funding from the International Monetary Fund and the European Union, debt rating agency Standard & Poor’s argues.

The NTMA has already embarked on its first investor roadshow since the IMF/EU €85 billion bailout in December as it briefs potential investors in Government debt in Europe, China, the Far East and the US over the next four weeks.

Speaking to reporters following an address to the London Irish Business Society, S&P’s senior director Frank Gill said Ireland should be able to access bond markets in 2012 as envisaged under the EU and IMF rescue program.

“I think there’s a high probability that they can do that,” he said. “But it’s highly uncertain at this point. It depends on market conditions.”

Mr Gill said Ireland’s €85bn IMF/EU programme would be enough to meet all of the country’s borrowing needs since “there won’t be any unexpected fiscal costs”. “They won’t need additional net funding ... and we think there is definitely a good probability that they can fund themselves in commercial markets next year,” he said.

Mr Gill’s positive stance comes in the wake of concerns about Ireland’s ability to fund itself were raised by Transport Minister Leo Varadkar who said in a Sunday Times interview that the country may need to resort to additional IMF/EU borrowing in 2012 as market yields remain prohibitive.

Mr Gill also said Ireland should also be able to withstand a possible debt default by Greece as the market “has the capacity to differentiate” between both countries.

“Ireland is a completely different economy structurally from Greece, it’s extremely open”, Mr Gill argued, adding that the country also has a very flexible labour market.

“I think ultimately it will be judged based on its capacity to meet the terms of the EU/IMF programme and its capacity to restore growth.”

However, co-head of strategy at broker Newedge Group in London, Bill Blain, argued that the Government has “pretty much” ensured it will not be able to fund any of its banks outside the European Central Bank after “unilaterally impaling” junior bondholders.

Additional reporting Reuters and Bloomberg