Ireland laid the foundation to regain its economic sovereignty, with the biggest bond sale since the near-collapse of its financial system forced the nation to seek a bailout in 2010.
Ireland’s Dublin-based debt agency increased the planned sale of bonds to 5 billion euros ($6.5 billion), in its first 10-year debt issue since the international rescue, according to a person familiar with the matter, who declined to be identified because the results aren’t yet public. The agency had planned to sell about 3 billion euros of bonds.
“The strong Irish comeback thus continues, and the country is another step closer to meeting also the ECB’s definition of full bond market access,” said Jan von Gerich, chief fixed- income analyst at Nordea Bank AB.
Ireland is seeking to become the first nation to leave a rescue program since the euro debt crisis started more than three years ago. After an accord to ease the cost of the nation’s bank bailout and with European leaders considering giving the nation more time to pay bailout debts, Prime Minister Enda Kenny’s government is on track to leave the bailout at the end of the year.
“Today’s deal is a positive reflection of the market’s increased comfort with Ireland’s recovery story, as we further reposition ourselves away from our peripheral peers,” said Stephen Lyons, an analyst with Dublin-based securities firm Davy, one of the managers of the sale.
The yield on the bond was 240 basis points over mid-swaps, a fixed-market benchmark, according to the person. The sale attracted at least 12 billion euros of bids, according to two people.
The NTMA last issued 10-year bonds in 2010, before the near-collapse of the country’s banking system prompted investors to shun the nation’s debt. In November of that year, the Irish government asked for a 67.5 billion-euro international rescue in a three-year program.
The NTMA hired Barclays Plc, Danske Bank, Davy, HSBC Holdings Plc, Goldman Sachs Group Inc. and Nomura Holdings Inc. as joint lead-managers for the transaction.
“This represents an important milestone in the country’s re-engagement with the bond market,” said Philip O’Sullivan, an economist at Dublin-based NCB Stockbrokers today. “Ten-year issuance could have important ramifications for Ireland’s credit rating and its plans for a successful exit from the bailout program at year-end.”
The yield on the Irish 5 percent bond maturing in October 2020 has fallen from a euro-era high of more than 14 percent in July 2011 to 3.65 percent.
Turnaround in Fortunes
The turnaround in Ireland’s fortunes has gained momentum since the government last month came up with a plan to lessen the burden of the former Anglo Irish Bank Corp.’s bailout. Under an accord which the ECB agreed not to block, the state swapped so-called promissory notes used to rescue the failed lender with 25 billion euros of long-term government bonds with maturities of as long as 40 years.
In addition, European finance ministers are considering giving Ireland more time to pay back loans stemming from the 2010 bailout.
Standard & Poor’s on Feb. 11 raised its outlook on Ireland’s BBB+ credit rating to stable from negative. Moody’s Investors Service Inc. said March 7 an agreement among European finance ministers to consider extending maturities on the Irish bailout is “very significant for Ireland” on top of the Anglo Irish deal.
Moody’s rates Ireland at Ba1, the company’s highest non- investment rating, with a negative outlook. Ireland in January sold 2.5 billion euros in bonds maturing in October 2017. The government sold 4.2 billion euros of new debt in July, including extra issuance of its October 2020 bonds.
Ireland may need as many as two longer-term bond sales before it’s eligible for the ECB’s Outright Monetary Transactions bond buying program, Finance Minister Micheal Noonan has said.
“Ireland could actually leave the EU-IMF program at any time it wants to,” Holger Schmieding, chief economist at Berenberg Bank in London, said. “What Ireland needs is now is not extra money. It doesn’t even need longer maturities for its outstanding official loans. What it needs is the implicit promise by the ECB to support countries that leave official programs.”