Foreign investors show faith in €4.19bn bond auction

The National Treasury Management Agency raised €4.19bn in fresh capital for the Government yesterday through the issue of two bonds — one maturing in 2017 and the other in 2020.

Market sources say the bond take-up was 65% international and 35% domestic and €3.9bn of the overall amount went into the 2017 bonds.

A further €1.04bn set to mature in Jan 2014 was swapped for the 2017 and 2020 bonds.

Speaking at the close of trading yesterday, John Corrigan, chief executive of NTMA said: “We are very pleased with the success of today’s transaction, particularly the fact that investors committed more than €4bn of new money to our first long-term issuance since Sept 2010. This marks a very significant step for Ireland on the way to full bond market access... the NTMA has now covered a significant proportion of the €8.2bn bond maturing in Jan 2014 which up until now has been seen as a challenging “funding cliff”.

Finance Minister Michael Noonan said the NTMA’s return to the bond market “is a very welcome and positive development. [The] commitment from investors of €5.23bn represents very strong demand, the majority of which I understand to be from foreign investors. The strong demand and the fact that over €4bn of this is new money is a significant step for Ireland in regaining our economic sovereignty”.

The 2017 bond carried a yield of 5.9% and the 2020 bond a yield of 6.1%. The weighted-average yield on the combined transaction was 5.95%.

Conall McCoille, Davy Stockbroker economist, said the bond auction was positive overall, “although the €1.04bn bond swap was a little light. I expected more there”.

John Moran, secretary general at the Department of Finance said: “One of the things that is important now is that we conclude our discussions in Europe because obviously at the rates we are borrowing, which is 5.9% and 6.1%, it wouldn’t be sustainable in the long term to keep borrowing at that so we need to continue with the discussions in Europe, finalise the agreement to adjust the programme.

“At that stage we’ll be very confident of having investors looking at Ireland in a completely different way.

“Once you get the Government back into the markets first, then what happens is the banks start releasing themselves in terms of potentially looking at being able to go back into the markets in due time,” he said.