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Bond Markets

Ireland returns to bond markets with €3.53 billion 'swap offer'

The NTMA swaps €3.5bn in bonds, which were maturing in January 2014, for paper maturing in February 2015.

IRELAND HAS RETURNED to the bond markets for its first major borrowing activity in 16 months.

The National Treasury Management Agency has made a ‘switching offer’ allowing the holders of a certain bond, which matures in January 2014, with a replacement which will be repaid in February 2015.

In a statement the NTMA said the offer was being held in response to inquiries from market investors who had demanded Irish government bonds maturing in 2015.

€3.53 billion of bonds, which were originally due to mature in January 2014 – with an average yield of 4.902 per cent – have been exchanged for bonds maturing in 2015 with an average yield of 5.152 per cent.

Previously there had been no Irish bonds maturing in 2015 – after the bonds maturing in January 2014, Ireland was not due to paying out on any more bonds until April 2016.

The move means that Ireland will need to have less cash on hand in 2014, as fewer bonds will be honoured on that date. There are still €8.2 billion in January 2014 bonds still in circulation after today’s move.

An NTMA spokesman said the decision to re-enter the markets had reflected “substantial demand among investors for our short-dated paper and the resulting decline in yields on Irish paper recently”.

The January 2014 mark was also particularly pressing for the government, which hopes to emerge from the EU-IMF programme in the second half of 2013.

Before today’s deal, the government would have needed either to raise almost €12 billion in January 2014 to repay the bonds that were maturing, or to ‘roll over’ those bonds by issuing newer ones. That could have been difficult if the economy remained fragile after ending the EU-IMF deal.

Ireland’s last visit to the bond markets was in September 2010, when Ireland sold €1.5 billion in bonds maturing in 2014 – at a yield of 4.767 per cent – and in 2018, with an average yield of just over 6 per cent.

Two months later Ireland was priced out of the secondhand bond markets and was forced to negotiate a bailout from the EU and IMF.

The NTMA will resume issuing new bonds later this year, under an experimental process to gauge investor interest in lending to Ireland.

Read: Ireland plans to return to bond markets this year >

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