Moody's downgrade hits as NTMA forced into higher interest

Today’s auction of government bonds results in more expensive yields than before.

THE NATIONAL TREASURY MANAGEMENT AGENCY has successfully raised €1.5bn in its latest bond auction – but has been forced into offering higher interest rates than it was two months ago.

Although the successful auction has resulted in nearly 90% of Ireland’s borrowing targets for 2010 being met already, just over halfway through the year, the auction was hit by Moody’s decision to downgrade Ireland’s rating yesterday.

The decision – which relabelled Irish debt from Aa1 to Aa2, meaning it was considered slightly riskier than previously – forced interest rates on ten-year bonds up to 5.537% – a significant increase on 4.72% rate offered only two months ago.

The rates offered on six-year bonds was slightly down on last month’s price, however. Bonds sold for 4.496%, down from 4.521% last month.

The NTMA has tried to portray the auction in a good light, however, saying it has guaranteed that the exchequer will be “fully funded” into the second quarter of 2011.

Katrina.Tuliao via Flickr

Bond Auction