Market ‘relaxed’ on Irish bailout exit

The market is quite relaxed about Ireland exiting the bailout programme without a precautionary credit line, according to NTMA chief executive, John Corrigan.

Last October, he said that it would be a advantageous for Ireland to have the safety net of a precautionary line.

However, speaking to RTÉ’s News at One, he said that when the agency started engaging with investors and credit ratings agencies after the question of whether Ireland should apply for a credit line became public, it emerged that the markets did not see it as a priority.

The ECB’s outright monetary transaction programme was unveiled in Sept 2012 as the ‘big bazooka’ that would be deployed in the event of a member state getting into difficulties.

The transactions will make unlimited purchases of short-term debt in exchange for strict conditionality.

However, Ireland would have to secure a credit line before it would be eligible for the transactions programme. “The outright monetary transaction has not been triggered yet and the precise terms and conditions have not been laid down,” he said.

The transaction is intended to deal with systemic issues and if these were to affect the eurozone, then Ireland could apply for the programme, he added.

He attributed Ireland’s sub-investment grade with Moody’s as reflecting concerns about the wider eurozone economy. However, if that was upgraded to investment status, then it could lead to a huge improvement in Irish bond yields. Many Asian pension, insurance and investment funds are prohibited from holding Irish debt because it is rated junk status by Moody’s.

In 2011, when bond yields hit 15%, it was mostly hedge funds holding Irish paper. But throughout 2012 and this year, more long- term investors have taken positions in Irish debt.

He termed the two long- term bond issuances so far this year as “opportunistic.”

From early next year, the NTMA would like to get back to a more normalised approach to raising debt at regular intervals.


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