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BoI cements bond market return

BANK of Ireland is expected to cement its return to the bond market today with its first unsecured, unguaranteed senior bonds since 2009.

The €500m three-year bond is expected to price at an auction today.

It is the first deal of its kind in four years, and follows recent transactions where Bank of Ireland has raised cash by issuing bonds secured on pools of mortgages.

Those so-called covered bonds are regarded as less risky than the unsecured senior debt now being issued, and are therefore easier to sell.

BNP Paribas, Deutsche Bank, Morgan Stanley and RBS have been mandated to manage the latest bond deal.

It is expected to be rated Ba2 by Moody's and BB+ by Standard & Poor's. That is in line with the bank's own long-term debt rating.

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Analysts expect the new bonds to price with an interest rate of 2.5pc to 2.75pc, based on the return investors are currently getting on the bank's less risky covered bonds.

However, with no direct comparisons available in the market, pricing is regarded as difficult to predict in advance of today's auction.

"This deal looks good for Bank of Ireland, given where the market is, they will get this money as cheaply as it could be gotten this year," said Ryan McGrath of Cantor Fitzgerald in Dublin.

Shares in Bank of Ireland were unchanged at 19.30 cents each yesterday after the bank confirmed that the bond deal was in the works. The shares have risen by as much as 62pc since the start of this year.

Irish Independent