Ireland re-enters debt market
DUBLIN, Ireland — BAILED-OUT Ireland is to auction debt this week for the first time in nearly two years, treasury officials said yesterday, in a test they hope will ease the nation’s return to normal borrowing next year.
Treasury chief executive John Corrigan said Thursday’s planned sale of ¤500 million ($56 billion) in three-month bills “marks an important first step in our phased re-entry to the capital markets”.
The widely expected move follows recent strong buying of Irish bonds in response to last week’s European Union summit agreement on managing debts in the 17-country eurozone. The yield, or interest rate, on Ireland’s 10-year bonds has fallen below 6.5 per cent, while those of shorter-term issues are nearer five per cent, the upper limit for Ireland to resume borrowing at affordable rates.
Ireland stopped auctioning bonds in September 2010 after a sale of its eight-year bonds required it offering a yield of six per cent. The nation, crippled by the escalating costs of a bank-bailout programme, was forced two months later to negotiate its own loan agreement with European and International Monetary Fund officials.
That ¤67.5 billion rescue fund is due to run dry by the end of 2013. By that time Ireland will either be selling its bonds again or, like Greece, be forced to negotiate a second EU-IMF bailout.
Tomorrow’s sale will be confined to bidding from 18 international financial houses that are recognised by the Dublin treasury as primary dealers in Irish bonds. Most are American, British, German and French banks. Just one, Davy Stockbrokers, is based in Ireland.
Analysts expect the new Irish bills to sell easily with yields of around two per cent, similar to recent auctions of short-term treasury bills in Spain and Italy, both of which are seen as bailout candidates if eurozone financial chiefs fail to contain the currency bloc’s debt crisis.
Ireland faces a funding cliff on the other side of its current bailout. It must drum up more than ¤18 billion in 2014 to cover its projected deficit and repay maturing bonds.