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Ireland impresses with 1st post-bailout bond sale

January 7, 2014

DUBLIN (AP) — Ireland made a triumphant return to debt markets Tuesday as it auctioned 10-year bonds to great demand for the first time following the country’s successful escape from an international bailout.

The Irish treasury said it sold 3.75 billion euros ($5.1 billion) in bonds, picking from a field of international bidders who sought to buy more than 14 billion euros of the debt securities. The high demand meant the bonds were sold at an average yield of 3.54 percent, better than investors’ views of fellow eurozone nations Spain and Italy.

Investor enthusiasm for Ireland’s new debt securities pushed yields on the country’s existing 10-year bonds down to 3.25 percent, an 8-year low.

“The Dublin government’s bond auction was a roaring success, more than three times oversubscribed, and the golden boy of austerity is making the rest of the PIGS — Portugal, Italy, Greece and Spain — green with envy,” said Brenda Kelly, an analyst at London financial derivatives trader IG Group.

She said Moody’s, the only credit rating agency yet to upgrade its position on Ireland, was likely to raise the nation’s debt securities back to investment grade in its next report Jan. 17.

Irish Finance Minister Michael Noonan said the aggressive bidding reflected a total reversal of the country’s economic crisis in 2010, when Ireland faced national bankruptcy over the runaway cost of a bank-rescue program. The yields on Irish 10-year bonds soared, rendering affordable borrowing impossible.

European partners and the International Monetary Fund that year gave Ireland a three-year emergency loan package worth 67.5 billion euros ($92 billion). Ireland opted not to seek any safety-net credit line from the EU or IMF when that rescue package expired Dec. 15 and instead built up a cash pile of 20 billion euros, enough to pay the state’s bills through 2014.

Michael Corrigan, chief executive of Ireland’s treasury, said Tuesday’s sales of bonds maturing in March 2024 generates cash that Ireland will need in 2015. He said Ireland would hold a few more auctions this year to drum up a maximum of 10 billion euros, depending on Ireland’s expected deficit.

Greece, Portugal and Cyprus remain recipients of EU-IMF loans for general government funding, while Spain has received aid specifically to support its banking sector.

Like Ireland, Spain enjoyed speculative real estate-fueled growth for a decade until that came crashing down amid the 2008 credit crisis, leaving banks exposed to massive toxic debts.

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