THE National Treasury Management Agency (NTMA) will pay less than half the amount it paid two months ago for money it borrowed on a three-month basis yesterday.
The sale was another sign that the bond markets are warming to Ireland. Yields on nine-year, five-year and two-year bonds fell to two-year lows this week on optimism that the creation of the European Stability Mechanism will help Ireland.
The NTMA sold €500m worth of three-month treasury bills with a yield of 0.7pc. That compares to a yield of 1.8pc on similar three-month bills sold in July. Yesterday's auction was oversubscribed by three times with bids of over €1.5bn placed.
"Today's issuance is another modest, but meaningful step in Ireland's phased return to full market financing," said Owen Callan, a dealer with Danske Markets, which is one of the organisations involved in selling bonds and treasury bills.
Yesterday's sale means that the NTMA has now raised almost €14bn in refinancing from Ireland so far this year.
Much of this refinancing was an attempt to chip away at a huge bond auction which had been due to take place in early 2014 after the present bailout runs out. The NTMA has pushed out some of the debt to ensure that the country does not have to raise massive amounts of money so soon after the bailout ends. NTMA boss John Corrigan said yesterday that this debt mountain had been a big concern for many investors.
Mr Corrigan also said the treasury bill sale could soon become a monthly event. Greece and Portugal both continued to sell treasury bills during the worst of the crisis but the NTMA stopped selling them.
The NTMA's 'cash on account' is now close to €26bn, or 16pc of gross domestic product, which provides a buffer if credit dries up at some point in the future.
The sale was hailed by Finance Minister Michael Noonan as an "excellent result" that "once again highlights the improvement in market sentiment towards Ireland".
Most of the demand for the treasury bills appears to have come from international investors.
Glas Securities, a Dublin-based firm that specialises in bonds, said the NTMA may soon start selling bonds rather than treasury bills to begin pre-funding 2015 financing requirements. That could happen within weeks, it added.
While yesterday's sale was a success, the NTMA is still paying vast amounts to borrow compared with countries such as Germany.
That's good for investors, who have also benefited from the renewed confidence in Ireland's future, following the European summit which promised to look at ways of reducing our bank debt.
An Irish bond launched at the end of July has already given investors a return of more than 10pc.
Goodbody's Neil Carroll said yesterday that an investor would need to buy and hold a German government bond for about eight years to get the same total return. Mr Carroll said it would make sense for the NTMA to supply more bonds "in the five-year area with yields now at about 4pc".