Ryan McGrath Comments: Ireland Sells 10-Year Debt to Cap Off Strong Start to 2016

 January 08, 2016, The New York Times Online

DUBLIN/LONDON (Reuters/IFR) – Ireland sold 3 billion euros (2 billion pounds) of 10-year debt on Thursday, covering as much as half of its planned issuance for 2016 at a low cost, capping off a strong start to the year for Europe’s fastest-growing economy. 

Ireland’s economy likely grew by around 7 percent last year and is set to be the EU’s best performing for a third straight year in 2016, a forecast backed up by robust retail sales, tax returns and unemployment data this week. 

The rapid recovery together with an easing of euro zone monetary policy has helped Ireland’s cost of borrowing over 10 years plummet from a peak of about 15 percent in 2011 to the 1.16 percent yield Thursday’s syndicated issue was sold at. 

At 9.6 billion euros, the total bid by investors would have been enough to cover the maximum amount of long-term funds the debt agency plans to raise this year after setting an issuance target of 6 to 10 billion euros. 

The National Treasury Management Agency (NTMA) said it limited the size of the deal so as not to "cannibalise" bond auctions planned for the remainder of the year, the first tranche of which will be outlined on Monday. 

"Today’s transaction, two years to the day from Ireland’s first bond sale since leaving the EU/IMF (bailout) programme, confirms that investor demand for Irish bonds remains healthy and broad-based," NTMA Director of Funding Frank O’Connor said. 

"We were always going to try and go in January, the backdrop for equities hasn’t been good at the open but for bonds, it has been helpful." 

Almost 90 percent of demand came from overseas, most of it European and led by British investors. Fund managers and banks accounted for 60 percent of the buyers and unlike other recent issuers, the NTMA did not have offer the debt at a discount. 

With funding for the rest of 2016 already raised before Thursday’s deal, the debt sold this year will cover the state’s borrowing needs well in advance while locking in record low interest rates. 

O’Connor said the modest amount left to be raised is unlikely to leave room this year for long-standing plans to diversify into the dollar market or launch inflation-linked bonds for the first time. 

With parliamentary elections expected to be called for late February, the debt agency will likely step out of debt markets for the rest of the first quarter and tap the new 2026 bond in April, Ryan McGrath, a bond dealer at Cantor Fitzgerald, said.