Ireland aims for 2012 bonds entry
Published 27/09/2011 | 05:00
IRELAND has a realistic chance of getting back to the bond markets next year, if current momentum can be sustained, analysts said last night.
It comes after Finance Minister Michael Noonan said in Washington that the country would seek to borrow a small amount in the market next year and be back in the bond markets in 2013.
A return to normal borrowing in 2013 is part of the aim of the EU/IMF bailout programme, but in the markets that was seen as unfeasible just weeks ago.
"Getting back into the markets has now become more realistic for Ireland," said Padhraic Garvey, a senior analyst at ING Bank in Amsterdam. That's because the yield -- or interest rate -- investors demand to hold Irish government debt has fallen from almost 14pc in mid-July to around 8.5pc yesterday.
Mr Garvey says it's a move in the right direction but not yet enough to get back to borrowing.
"The test is whether 10-year yield falls below 8pc and stabilises; once that happens, the NTMA could look at borrowing, say €100m, and building from there."
Irish yields have only dropped below 8pc twice since the bailout deal last November, but never for long and have not been as low as 8pc since the start of the year.
Padhraic Garvey thinks the Government could end up paying interest of around 7pc for an initial bond deal, compared to the 3.5pc that loans cost under the revised bailout deal.
He said paying initially higher interest rates was the price to be paid for getting back in the markets.
Even interest rates that high on small amounts of debt would not increase the average cost of borrowing significantly, he said.
Yesterday, Irish government bonds were the best performers in the European market. In a sign of the Irish story 'decoupling' from the other bailout countries, Irish bond yields fell by more than 0.25pc while Greece and Portugal both saw their yields shoot up.
Action by the ECB in recent weeks may be one factor helping the Irish bonds that could be shortlived.
Yesterday the ECB said it had bought €3.9bn of government bonds in trades aimed at stabilising bond prices. That's down from €9.8bn the previous week and €13bn a week earlier.