Tuesday 24 October 2017

Lenihan rules out aid for Ireland as auction nears

Finance Minister Brian Lenihan said the country won’t need financial aid from the European Union as it prepares to sell as much as €1.5bn in a bond auction this week.

Lenihan told the Sunday Telegraph he rejected speculation that the cost of bailing out its banking system will force the country to turn to the EU and the International Monetary Fund for emergency funding. Finance ministry spokesman Eoin Dorgan confirmed the remarks.

Lenihan is struggling to convince investors that the Government can shore up the banking system after Standard & Poor’s downgraded the country’s credit rating on concern that the cost of the bailout is rising.

The extra yield that investors demand to hold 10-year Irish government bonds over German counterparts rose to a euro-era high of 387 basis points on September 17.

Michael Somers, former chief executive officer of Ireland’s National Treasury Management Agency, told the Irish Times in an interview published September 18 that the total cost of the banking bailout could reach €40bn.

Bond yields rose after economists at Barclays Plc last week said that the Government may need to seek aid if conditions worsen. They also said that thre country has a “comfortable near-term liquidity position.”

‘Negative’ sentiment

“Sentiment had been getting more negative and there were a couple of pieces which have been reported in the media in a negative way,” economist Juliet Tennent at Goodbody Stockbrokers said in a September 17 telephone interview. “I think it’s been blown out of proportion.”

NAMA will test investor demand for Irish debt when it sells between €1bn and €1.5bn of four- and eight-year bonds tomorrow.

Central Bank governor Patrick Honohan is scheduled to give a speech later today on regulation and the banking system.

“The Irish auctions will succeed, it’s a question of cost,” Bill Blain, co-head of fixed income at Matrix Corporate Capital LLP in London, said in an emailed note today.

“We’ve seen buyers of Irish paper in looking to bottom fish bargains in cheap government-guaranteed paper.”

The premium investors charge to hold Irish debt was almost unchanged at 386.1 points today. It has risen from 227.5 points at the start of August.

“We have to go out there and put our best foot forward and tell the international community we are doing our very best,” John Gormley, Green Party leader said in an interview with RTE Radio today.


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