Friday 15 December 2017

Ireland sells €1.5bn of bonds at auction

Louisa Fahy

Ireland sold €1.5bn of bonds in an auction, with demand rising for a 2014 note.

Investors bid for 5.4 times the amount of the 2014 security offered, compared with 3.1 times in May, the National Treasury Management Agency (NTMA) said today.

Demand for a 2020 security fell to a so-called bid-to-cover ratio of 2.4, against 3 in July. The yield premium investors demand to hold Irish 10-year bonds rather than benchmark German bunds declined.

“This is a strong result,” said Fergal O’Leary of Dublin-based Glas Securities, which specialises in fixed-income markets.

“The bottom line is that Irish bonds represent good value after the recent sell-off. The NTMA is now in a strong position to look at pre-funding for 2011.”

While the government has spent almost two years on an austerity drive to trim the budget deficit, the cost of supporting Anglo Irish Bank had undermined sentiment before the auction.

Concern that bailing out lenders will become increasingly expensive yesterday helped drive the extra yield, or spread, that investors demand to hold Irish 10-year bonds instead of benchmark German bunds to the most since May.

The spread between Irish 10-year bonds and German bunds narrowed 9 basis points today to 290 basis points. It was 306 basis points on May 7, just before the European Union announced a €750bn financial backstop for the region’s most indebted nations.

Ireland sold €500m of the 2014 notes to yield 3.627pc compared with 3.11pc at an auction in May. It also sold €1bn of 5pc 2020 bonds to yield an average 5.386pc, compared with 5.537pc at a previous auction in July.


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