BANK OF IRELAND has raised €1 billion in a bond auction – becoming the first bailed-out lender to activate funding on the open markets without government assistance.

The bank raised the funds in an auction yesterday, at an interest rate of 3.125 per cent.

The funds mean the bank can become less reliant on funding from the European Central Bank.

The auction attracted significantly more demand than was needed, with investors offering up to €2.5 billion to the bank.

The interest from lenders prompted the bank to accept twice as much as it had originally anticipated; the bank had only sought to borrow €500 million.

German and Austrian investors accounted for 37 per cent of the cash raised in the auction; only 2 per cent came from domestic lenders.

Finance minister Michael Noonan welcomed the news, saying it was the first time since October 2010 that Bank of Ireland had been able to access international money markets.

“The commitment from investors of €1 billion in unguaranteed Irish bank paper is important in decoupling the Sovereign from the banks,” he said.

“It is a step towards their full return to wholesale markets, independent of State support.”

The minister added that the demand for the bonds illustrated “an expression of confidence in the Irish economy”.