Irish

Wednesday 20 August 2014

Government raises €3.75bn in bond auction

NTMA planning to raise between €6bn and €10bn in pre-funding for 2015

Ailish O'Hora

Published 07/01/2014 | 14:02

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Taoiseach Enda Kenny and Michael Noonan
Taoiseach Enda Kenny and Michael Noonan

THE Government has raised €3.75bn in funding on the open markets in its first 10-year bond issue since the EU/ECB/IMF troika left these shores.

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The funds were raised at a yield of 3.543pc - a low level for 10-year bonds comparison with many countries.

The order book included interest from over 400 fund managers, pension funds, insurance companies, banks and other investors, including some from the Middle East and Asia and the total book amounted to some €14bn, the National Treasury Management Agency said today.

Irish bond yields fell more than 10 basis points this morning - down to to 3.2269pc from the 3.3282pc opening level in tandem with the offer.

The National Treasury Management Agency's  working plan for this year is to raise, subject to bond market conditions, between €6bn and €10bn by way of pre-funding for 2015, it added.

“The success of last year’s two substantial bond sales confirmed Ireland’s ability to access long-term bond markets at sustainable rates. Having initially re-engaged with the short-term debt markets in 2012 followed by two medium and long-term syndications in 2013 and another one today, the final phase in market normalisation will involve a series of bond auctions,’’ said the NTMA's John Corrigan.

“A particular priority is to complete the conversion of the National Pensions Reserve Fund into the Ireland Strategic Investment Fund (ISIF) which will invest on a commercial basis in areas of strategic importance to the Irish economy. Work on the ISIF business plan is at an advanced stage.”

The NTMA confirmed earlier that it would test international bond markets for the first time since we exited its EU/IMF/ECB bailout by issuing a new syndicated 10-year bond.

The sale was Dublin's first bond issue since last March when the NTMA sold €5bn of 10-year paper.

Taoiseach ENDA Kenny welcomed the first sale of Irish Government bonds this year, calling the deal an "indication of further confidence in Ireland".

The Taoiseach was speaking as the National Treasury Management Agency (NTMA) finalised today's successful placement of €3.75bn  of 10 year Government bonds.

"I am very pleased with that and I'd like to commend the National Treasury Management Agency for the way they've gone about their business in the last 12 months," Mr Kenny said.

"This is a further endorsement of the progress made by the people of Ireland, by the decisions taken by government in exiting the programme and we move on to maintain our momentum, to grow our economy and to provide jobs," he said.

The decision to borrow came at a good time; the yield on the 10-year bond dropped to its lowest level since January 2006 yesterday, falling to 3.35pc. It peaked at 14.07pc on July 18, 2011.

The NTMA had mandated Barclays, Citi, Danske Bank, Davy, Deutsche Bank and Morgan Stanley as joint lead managers for the sale.

"We anticipate significant demand and for the issuance to be well oversubscribed," said Ryan McGrath, an analyst at Dublin-based financial advisory firm Cantor Fitzgerald earlier.

The Irish Independent revealed yesterday that the head of Saudi Arabia's central bank will visit Dublin for talks with the NTMA about potential investment in Irish government bonds, following discussions with Taoiseach Enda Kenny.

"We would view a €3bn to €4bn issuance target as appropriate given Ireland's limited funding requirements in 2014," said Cantor. It expects the bond to be priced at between 3.6pc and 3.7pc.

Ireland's 10-year bond yield has fallen to 3.39pc as of yesterday afternoon from a euro-era peak of more than 14pc in July 2011, as the government reined in its budget deficit and real-estate prices began to stabilise under the bailout programme.

The sale comes about a week before international rating agency Moody's, alone among the four largest ratings firms with a non-investment grade stance on Ireland, is due to update its view on the country. Moody's downgraded Ireland's credit rating to non-investment grade or "junk" status in July 2011 after Europe's most troubled property market collapsed.

Finance Minister Michael Noonan said on December 6 that he hoped Moody's would raise the nation's credit ranking this year. The Saudi government and others are unlikely to invest in Irish debt until credit rating agencies lift their rating for Ireland to a less risky level.

Ailish O'Hora and Sarah McCabe

Irish Independent

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