THE cost of Irish borrowing fell this morning following the recent upgrade to "investment status" from "junk" by ratings agency Moody's.
Yields on Irish bonds fell 15 basis points to around 3pc in strong demand, said John Corrigan, the head of the National Treasury Management Agency (NTMA), which manages the country's debt.
At the weekend, Moody’s upgraded Ireland’s government debt from “junk” to higher quality “investment grade” status and also gave the country a positive outlook.
The decision is a big boost to the government and the NTMA, which had lobbied hard for the change.
The country is now regarded as a lower risk investment by all of the main credit agencies for the first time since 2011.
Mr Corrigan told RTE's Morning Ireland: "There's been a fairly sharp reduction in yields which is welcome news because we still have substantial borrowings to make this year."
He added that each one tenth of 1pc of a fall in the interest rate for every billion we borrow represents a saving of about a million per annum.
Mr Corrigan said that Moody's was running a reputation risk by leaving Ireland in sub-investment grade for so long and that was one of the lines used when the NTMA was in discussions about an upgrade with the agency.
He also said that certain investors like Middle East sovereign wealth funds and investment funds in Japan would now be free to buy up Irish bonds.
"Some investors require a borrower to have an investment grade rating from all agencies," he added.
Mr Corrigan said we are fully funded for 2014 and what we are looking at now is 2015 funding.
With €4bn already raised a further €4bn is necessary and he said that would be made through " a modest programme of auctions."
Earlier Finance Minister Michael Noonan said the move will help to lower borrowing costs for companies and individuals.
Commenting on the weekend announcement Minister Noonan stated: “The decision by Moody’s to upgrade Ireland’s credit rating reflects the significant progress that has been made in stabilising the public finances, restructuring the banking sector and, most importantly, growing the economy and creating jobs.
"Ireland is now rated at investment grade by all of the major credit rating agencies, highlighting the major improvement in investor sentiment towards Ireland.”
The end of the bank guarantee and stabilisation of the banking sector was a factor in Moody’s decision, the ratings agency said.
The upgrade adds to a run of good news including falling unemployment and the exit from the bailout that has already encouraging lenders to slash the interest charged on the national debt to 3.5pc – lower than the cost of loans under the bailout and less than we paid before the debt crisis.
Moody's have also the debt ratings of NAMA, whose debt is fully and unconditionally guaranteed by the Irish government, to Baa3/P-3 from Ba1/NP. The outlook on NAMA's rating is also positive.
Ireland's foreign and local-currency country ceilings for long-term debt and deposits have been raised to A2 from A3.
The country ceilings for short-term foreign-currency debt and deposits were also raised to P-1 from P-2.