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Ireland Sells Bonds in Oversubscribed Debt Auction
http://www.bloomberg.com/apps/news?pid=20601009&sid=aOJG6htwWX1o#
By Dara Doyle
May 18 (Bloomberg) -- Ireland sold 1.5 billion euros ($1.86 billion) of bonds in an oversubscribed auction, its first since euro-area leaders unveiled their unprecedented aid package to help indebted nations in the bloc.
Investors bid for 3.1 times the 2014 and 2020 securities offered, the
National Treasury Management Agency in Dublin said today. It sold 750 million euros of 4 percent debt maturing in 2014 to yield an average 3.11 percent and 750 million euros of 4.5 percent debt maturing in 2020 to yield 4.72 percent.
Oliver Whelan, head of funding at the agency, said he was “very satisfied” with the result.
European leaders on May 10 offered a 750 billion-euro rescue package as they sought to calm a rout in bond markets. Concern that the mounting debt crisis in Greece would spread to other nations sent the premium investors charge to hold the debt of countries such as
Ireland, Spain and Portugal soaring to euro-era highs earlier this month.
“In the context of recent nervousness in peripheral European government bond markets, this is a good result,” Dublin-based Glas Securities, which specializes in fixed-income markets, said in a note today.
‘Tarred’
The yield today offered was higher than at previous auctions. In a February sale of 4 percent 2014 debt in February, the average yield was 3.03 percent. A March auction of 4.5 percent bonds maturing in 2020 yielded 4.43 percent.
“In addition to the funds already secured this year, the NTMA currently has cash balances in excess of 20 billion euros, leaving it in a very comfortable and enviable position,” said
Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. “However, Ireland now appears to be getting tarred with the same brush as the likes of Greece and Portugal, which suggests that it may well end up paying higher interest rates to raise funds at the remainder of this year.”
The difference in yield, or spread, between 10-year Irish securities and 10-year German bunds, the euro-region’s benchmark government securities, narrowed 3 basis points to 181 basis points today. It widened to 306 basis points on May 7.
Ireland “may well” see the conditions for spreads to narrow, Whelan said by phone today. The agency has now raised about 66 percent of its planned 2010 issuance and he said the full-year total will probably be “slightly over” 20 billion euros. Ireland’s next auction is scheduled for June 15.
The 2011 issuance may be in the “low 20 billions” of euros, depending on the budget deficit, Whelan said.
Ireland’s budget gap widened to 14.3 percent of gross domestic product in 2009, almost five times the European Union’s 3 percent limit. Greece’s deficit was 13.6 percent of GDP, while Spain had a 11.2 percent shortfall. The Irish government aims to narrow the gap to the 3 percent limit in 2014.