Thursday, 18 October 2012
Ireland’s cost of borrowing stable as €500 million raised on markets
IRELAND HAS RETURNED to the bond markets for a fourth successful auction since the November 2010 bailout.
The National Treasury Management Agency sold €500 million in short-term bills this morning at a yield, or interest rate, of 0.7 per cent.
The cost of borrowing is the same as what was paid to investors last month for bonds with a three-month maturity.
The agency responsible for managing the State’s debt said demand was 3.6 times the amount on offer.
Owen Callan is a senior dealer at Danske Markets and said today’s auction brings the agency’s total issuance to €14.34 billion which will provide “an enormous cash buffer of about €25 billion when coupled with its commercial paper programme.”
“This effectively prefunds most of the January 2014 bond redemption which had previously been considered a huge hurdle for Ireland to overcome.”
He said the bulk of today’s buying was by international investors who were mainly from continental Europe.
“This will certainly be seen as a welcome boost in the context of Ireland’s position at the EU summit today, and will further highlight our progress particularly when compared with periphery Member States.”
Although an auction of long-term bonds seems unlikely in the coming months, the NTMA may now look at more regular and scheduled issuances.
Ireland’s cost of borrowing has fallen significantly since July when an interest rate of 1.8 per cent was charged in the first auction since the European Union and International Monetary Fund’s intervention. Prior to that, the interest rate stood at 4.28 per cent.