Ireland raises €2.5 billion in first bond auction of 2013

Tuesday 08 January 2013 22.04
NTMA raised €2.5 billion in today's bond sale
NTMA raised €2.5 billion in today's bond sale

The National Treasury Management Agency has sold €2.5 billion of debt.

The auction raised a quarter of the €10 billion it aims to borrow in 2013 ahead of a planned exit from its EU/IMF bailout.

The NTMA had said yesterday that it would kick-off the funding plan by reopening the 2017 bond it issued last July.

That €3.8 billion sale marked the country's return to the long-dated debt market following its EU/IMF rescue in November 2010.

The agency had hoped to sell around €2 billion, a source close to the deal said, but netted more after orders topped €7 billion.

The strong demand also allowed the NTMA to tighten the deal's pricing, trimming the yield to 3.32% from 3.45% indicated at its launch.

Of the amount issued today, 13% was taken up by domestic investors and 87% by overseas investors, according to a statement released by the NTMA.

The overseas investors were mainly from the UK (35.6%), Nordic countries (12.4%), France (9.5%), and Germany (7.2%).

Over 200 investors submitted bids. The total bids received amounted to some €7 billion.

Finance Minister Michael Noonan said the success of the bond issue represented international recognition of Ireland's progress but that it reinforced the case for helping the state to reduce the burden of bank debt assumed as part of the 2010 bailout deal.

He said European Heads of State and Government had last year committed "to break the negative link between the sovereign and the banks" following an EU summit in July.

"Today’s issuance reinforces the need to deliver on this commitment so as to ensure continued and assured market access," he said.

The 2017 paper was initially sold in July at a yield of 5.9% but demand for Irish debt has since pushed its yields below those of Spain, still widely expected to need a bailout, and close to those on Italian debt.

Irish bonds' outperformance, driven by the country's steady progress in meeting targets set under its bailout and a more stable environment across the euro zone, also allowed the NTMA to undertake two bond swaps, a maiden amortising bond issue, and a number of treasury bill sales last year.

That sliced €10 billion off the country's post-bailout funding needs, easing its path towards exiting the programme on schedule at the end of the year.

The NTMA said in November that it wants to raise another €10 billion this year to cover the country's 2014 funding requirements and hopes to return to regular monthly bond auctions sometime this year.

''Demand for today’s bond was high from the start, with a wide range of international investors involved. This, coupled with the fact that the overall bids totalled around €7 billion, is very positive and suggests that Ireland is gradually regaining creditworthiness in the eyes of international investors,'' commented Owen Callan, a bond dealer at Danske Bank, one of the lead managers for the deal.

"To get 25% of issuance for the year away in the first week of January means they are well ahead of the curve and bodes well for the future. It shows that investors very much believe in the Irish recovery story'. It should also support further steps by the Irish banks in regaining market access of their own during 2013. Overall it’s a great start to the year for the NTMA,'' he added.