Ireland makes a successful return to the bond market

6th July 2012

According to the Guardian newspaper, the Irish government managed to raise €500 million, or $626 million through the issuance of three-month Treasury bills at a yield of 1.80%. The Dublin-based National Treasury Management Agency (NTMA) said it received €1.4 billion, or $1.8 billion, in bids, an indication of healthy demand.

Ireland, effectively shut out of capital markets before the 85 billion euro ($107 billion) bailout, hopes to run three or four more short-term auctions this year and extend maturities from three to six months.

"It's a significant step but there's a lot more work to do before we get back into the bond markets. There's a big difference, in fairness, between selling three-month paper and selling longer-term bonds," NTMA Chief Executive John Corrigan told national broadcaster RTE.

"Accessing the longer-term bond markets is critically dependent on two factors: one of which is largely within our own control, that's sticking to the troika programme, and the second one is the wider mood music in Europe, which in fairness has significantly improved since the summit at the weekend."

The return to the debt market comes after Fitch Ratings said earlier this week that the success of last week's EU summit improved the chances of Ireland returning to the bond market.

"There is a better chance for Ireland now to return to the market," Gergely Kiss, a director in Fitch's Sovereign Rating Group in London, said in a phone interview today. "What we saw at the end of last week isn't a panacea, but it is an encouraging sign."

"This could kick in a virtuous cycle for Ireland where you have more market confidence which is reflected in lower yields, more robust refinancing costs, and that makes the whole debt burden more bearable for Ireland," he said.

But it wasn't all good news for Ireland this week. A day before the debt auction, it was revealed that Ireland's unemployment rate rose to an 18-year high of 14.9 percent in June. The Central Statistics Office said the rising joblessness could have been worse but for Ireland's tradition of mass emigration in times of economic distress. An estimated 76,000 left the country last year for stronger job markets in other English-speaking countries -primarily Britain, Australia and Canada – and the trend has continued this year.

Furthermore, an IMF paper released last month illustrated the depth of Ireland's banking crisis. The report, entitled Systemic Banking Crises Database: An Update, by Luc Laeven and Fabián Valencia, says: "Ireland holds the undesirable position of being the only country currently undergoing a banking crisis that features among the top-10 of costliest banking crises along all three dimensions, making it the costliest banking crisis in advanced economies since at least the Great Depression."

"And the crisis in Ireland is still ongoing."


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