THE NATIONAL TREASURY Management Agency has auctioned €500 million in short-term government debt on the international financial markets for a better yield than expected.
Conducted on the Bloomberg Auction System, the three-month Treasury Bills fetched a yield of 1.8 per cent – beating the 2 per cent expected. The offer was oversubscribed, as anticipated.
Minister for Finance Michael Noonan has welcomed the successful auction as a “very important milestone on Ireland’s continuing path to recovery”.
He claimed today’s auction shows that the markets have “reacted positively” to the government’s economic programme “and the decision taken at last week’s [eurozone] summit to break the negative links between the sovereign and the banks”.
“The Government is focused on emerging from the programme and returning to the markets next year,” the minister said after the sale. “Today’s return to the Treasury bill market is a small but a very important first step in this regard and we will continue to take the necessary measures to fully implement our programme and reduce our deficit in line with commitments.”
“It’s very rare that you would go to the market for a failed auction,” Peter Browne from the Institute of Financial Training has told RTÉ’s Today with Pat Kenny.
However, Browne cautioned that selling a three-month treasury bill is a very different matter to selling ten-year bonds. ”The sort of investor who buys this is totally different to the traders who buy five- and ten- year bonds,” he said, and cautioned against “reading anything into this as bringing Ireland closer to returning to the bond market”.
It’s a toe in the water and a step in the right direction, though, he added.
Owen Callan, senior dealer at Danske Markets, also gave a cautious welcome to today’s Treasury Bill sale. He says that while the sale has gone well for the NTMA symbolically, “if we are to expect a full return to the long-term debt markets later this year, political and economic stabilisation in the eurozone, and signs of recovery in the domestic economy, are required”.
The T-Bills sold today are due to reach maturity on 15 October 2012. Interest is not paid on the Bills during their lifetimes; the government must pay their full value when they reach maturity.