THE GOVERNMENT has raised a further €1 billion on the sale of two bonds amid strong interest from investors but at a cost that remains the highest of any sovereign state in Europe.
The State’s fund management body, the National Treasury Management Agency (NTMA), auctioned €500 million worth of three-year bonds and €500 million worth of seven-year bonds.
The bond auction, the fourth in a monthly series which began in March, brings to €14.3 billion the total amount raised this year.
The Government must borrow a record €25 billion this year to meet the budget deficit following the collapse of the property market and the economic slump.
The downgrading of the State’s rating by Standard Poor’s (SP) last week, the second cut in three months, had little effect on the cost of the bonds sold yesterday.
The 2016 bond was sold at an average yield of 4.755 per cent and was 2.5 times over-subscribed by investors, while the 2012 bond was sold at an average yield of 3.056 per cent as investors bid 2.2 times the debt offered on the securities. The difference in yield, or spread between Irish and German 10-year bonds – the benchmark gauging the financial associated with the State – remained unchanged at 196 basis points (1.96 percentage points).
It surged to 284 basis points in mid-March, its highest level in 10 years, compared with an average of 22 basis points over the past decade.
Alan McQuaid, chief economist at Bloxham Stockbrokers, said that the slowing rate of decline in the global economy should lead to increased “risk appetite” which, he said, should make it easier for the NTMA to raise the remaining funding required for the year.
Anthony Linehan, the NTMA’s deputy director of funding and debt management, said there was demand for Irish Government bonds due to the high return the State was paying to investors.
“There is some demand for Ireland – we are good value for what is out there. We knew there would be demand for the 2016 bond. It is a long time since we tapped for seven-year bonds.”
The Government will pay more for bonds than their Greek counterparts in the debt markets as Greece is thought to be almost finished raising money through securities sales this year, according to a bond analyst at Dutch bank ING.
The 10-year Irish bond cost 25 basis points more than the equivalent Greek bond, which was near its highest level in almost a decade.
The bonds cost 96 basis points less than equivalent Greek bonds at the start of the year.
The NTMA has raised €4.3 billion in bond auctions and a further €10 billion in two bond sales managed by banks in syndication deals.
The agency will announce at the end of this month the next series of bond auctions.
Another syndicated bond sale is being planned for later this year, which will raise a greater sum than the amounts bid by investors in the auctions.
