Greek crisis puts Ireland's borrowing auction under the spotlight
A €1bn borrowing auction by Ireland next Tuesday will be closely watched as the first borrowing by a member of the 'PIGS' group of high-deficit eurozone countries since this week's agreement on support for Greece.
The interest rate on Greek government debt rose by 0.25pc to 6.135pc yesterday as markets fretted over the lack of detail on the EU support scheme. The rate on similar Irish government 10-year bonds was largely unchanged at 4.68pc.
Analysts said the National Treasury Management Agency (NTMA) was right to go ahead with the regular monthly auction, and might even secure a lower interest rate than the January fund raising.
"It will be a test, since Portugal was unable to borrow just €500m on acceptable terms last week," said Dermot O'Leary, chief economist at Goodbody Stockbrokers.
"But there is every possibility that it will show the cost of Irish government borrowing falling further, relative to Greece, Portugal and Spain."
As is normal at these auctions, the NTMA will offer to borrow up to €1.5bn in four-year and 10-year bonds.
The authorised dealers then offer the interest rate they are willing to accept to buy the government bonds.
The NTMA announced yesterday that the world's largest investment bank, Goldman Sachs, has joined the 13 other "primary dealers" authorised to deal with the agency.
"The NTMA is confident that the Irish government bond market will benefit significantly from the strong presence which Goldman Sachs International has in other European sovereign bond markets," the agency said.
"Irish rates have been remarkable stable recently," said Rossa White, economist at Davy Research. "Some commentators are even taking us out of the 'PIGS' list."
If the Greek agreement established the principle that eurozone countries would not be allowed to default, it could lower borrowing costs for all member states, Ireland included, analysts say.