In 2010, Ireland Inc was a wounded animal, the financial system was imploding and Irish bonds were the plaything of bond market vigilantes and hedge funds that shorted and sold anything Irish like it was Enron stock.
In one of its last forays into the market in January 2010 – the State was locked out of the market later that year – the National Treasury Management Agency (NTMA) issued €5 billion of 11-year bonds at a yield or annual interest of 5.1 per cent. The auction attracted €7 billion in orders. Normally these auctions are oversubscribed by a multiple of five or six times the original offer.
More worryingly, the yield on 10-year Irish notes in secondary markets had jumped to 14 per cent, meaning those wishing to offload Irish bonds had to offer would-be investors a 14 per cent rate of return on a supposedly safe-haven sovereign bond, so low was the Irish government’s financial standing.
Juxtapose this with Tuesday’s NTMA auction of seven-year bonds, also taking place in the teeth of a global crisis, this time on foot of the Covid-19 pandemic.
The agency sold €6 billion of seven-year bonds with an annualised yield of just 0.24 per cent. The auction elicited a record €33 billion in orders, the largest ever for an Irish bond auction, and 5.5 times the amount on offer.
Coronavirus crisis
The agency had been planning to sell between €3 billion and €4 billion of debt but obviously decided to strike while the iron was hot. The funds will help finance the Government’s response to the coronavirus crisis, which is expected to blow a €22 billion hole in the public finances.
“This demand highlights the progress Ireland has made in recent years to improve its sovereign credit rating and its debt sustainability,” the NTMA’s chief executive, Conor O’Kelly, said.
We may be headed for a major economic reversal, but we’re clearly viewed by the markets as financially sound, you might even say, a good bet. What a difference a decade makes.
