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Top Citi analyst rubbishes idea of return to markets

CITI's top credit analyst has rubbished the chances of Ireland returning to the bond market later this year, saying he "really struggles" to see how the sovereign could hope to raise new debt so soon.

The comments from Citi's Global Head of Credit Strategy Matt King come just days after National Treasury Management Agency (NTMA) boss John Corrigan said a return to the bond markets before the end of the year was "possible".

"I would disagree with that conclusion," said Mr King, who was in Dublin yesterday to address a gathering of about 180 Citibank clients.

"It could only happen if growth prospects improve dramatically and you did something almost inconceivable to solve the bank situation.

"I really struggle to see how you could get to that position."

Ireland abandoned issuing new debt in late September, and has a €50bn bailout fund available to finance the sovereign's needs over the coming years.

Mr Corrigan last week said the bailout partners -- the ECB, IMF and EC -- were keen for Ireland to return to the market sooner "because that would be a reflection of the success of the programme". But Mr King said the terms of the bailout -- specifically the 5.7pc interest rate -- would make it more difficult for Ireland to issue new debt.

"If you were borrowing money at 3pc you might be able to grow out of it, but as it is we think the growth numbers will deteriorate," said Mr King.

Ireland is unlikely to be able to borrow money "at any interest rate that makes sense" for several years, he added.

Addressing Citi clients in Dublin yesterday, Mr King said that ordinary companies in countries with distressed sovereigns would find it very difficult to raise debt in 2011.

Asked if that meant Irish companies would find it "very tough" to raise new debt, he replied: "Yes."

"Investors in corporate credit this year. . . are going to continue to suffer a rollercoaster on the ups and downs of the sovereign situation," he said.

"A growing number of investors are looking at the market and saying, 'I don't want to own any exposure to Ireland because the prices do not compensate for the risk.'"

Bank of Ireland is hoping to raise some fresh cash from investors as part of its €2.2bn recapitalisation ahead of a February deadline.

Mr King said it would be "extremely difficult" for the bank to raise private money, particularly given European moves to force losses on previously 'safe' bondholders beyond 2013. Debt holders are already revolting at efforts to force losses on riskier debt instruments offered by Anglo Irish Bank, AIB and Irish Nationwide.

Mr King said that while investors were "more receptive" to haircuts in depressed countries like Ireland, a "battle" between bondholders and taxpayers would still be played out in the courts.

Irish Independent