AP Photo/Thanassis Stavrakis/PA

Irish bond auction welcomed but 'country is still on life support'

The NTMA auctioned over €4 billion in Irish bonds yesterday in the first long-term debt sale since the bailout.

INVESTORS HAVE BOUGHT €4.19 billion in new Irish bonds in the state’s first return to the long-term government bond market since the 2010 bailout.

The bonds maturing in 2020 carry an annual interest rate of 6.1 per cent, while those maturing in 2017 carry interest of 5.9 per cent.

Minister for Finance Michael Noonan welcomed the NTMA announcement and described the auction as “an important step”. However, “the true indicator of Ireland’s success will be our full emergence from the [bailout] programme and return to the international markets at sustainable rates,” he said.

Rate concerns

Economist and former Dept of Finance special advisor Alan Ahearne told RTÉ’s Morning Ireland today that the interest rates on Irish debt need to come down.

“No country can pay 6 per cent interest rates on its borrowing for an extended period of time,” he said, adding that if Ireland is going to properly get back into the markets, then we need to see greater stability in the eurozone area – which seems a long way away.

Speaking to Newstalk Breakfast, Lucinda Creighton said that the country is “still on life support” and that rates of 6.1 per cent “are pretty good given the circumstances”, but hailed the auction as a crucial first step towards Ireland regaining its economic sovereignty.

The Minister of State for European Affairs also said that the government position remains that it will not be seeking a second bailout.

Fianna Fáil’s finance spokesperson, TD Michael McGrath, welcomed the sale but noted that “the funds raised have come at a high price”.

““Secondly, it is clear that following last month’s EU summit, the markets have priced in the Government achieving an overall deal on revisiting the cost of Ireland’s bank bailout,” McGrath added. “Failure to achieve a deal that meets market expectations will mean the relatively favourable market sentiment towards Ireland will be short-lived.”

Meanwhile, Danske Markets senior dealer Owen Callan described the sale as “extremely good news”:

The key point to understand about this issuance is that it will significantly reduce the so-called ‘funding cliff’ which Ireland faces in January 2014 when €8.2bn in Government debt matures. This bond redemption is probably the biggest challenge for the Irish Government to overcome in avoiding a second round of funding from the Troika at the end of next year.

“In conjunction with the recent Treasury Bill issuance and other measures,” he added, “Ireland should now be able to pre-fund most of that funding requirement and in so doing, exit the Troika programme as planned.”

Callan also suggested that the sale could see Moody’s re-evaluate its current ‘junk’ status rating on Ireland.

Ireland raises €4.19 billion in first return to bond markets >

Mario Draghi: The ECB will do “whatever it takes” to save the euro >

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