Irish economy on a normalised footing as demand for sovereign debt grows

The rebound in demand for Irish sovereign debt shows little sign of dwindling following this morning’s €1bn auction by the National Treasury Management Agency.
In a further indication that Ireland’s economy has regained a normalised footing after its crippling banking crisis, investors piled into the sale pushing yields below comparable issuances earlier this year.
A €700m bond maturing in 2026 attracted a yield of .72pc, compared to last month when the NTMA issued the same dated paper for a yield of .94pc.

In total 1,573m bids were submitted for the note, producing a bid to cover ratio of 2.25.
A second €300m bond maturing in 2045, garnered a yield of 1.9pc.

This morning’s auction takes the government within its €9bn-€13bn target range for the year, cementing expectations the total borrowings will either hit or exceed the maximum threshold.

If last month’s inaugural inflation linked note, which raised €609.5, is factored in, the NTMA has borrowed a total of €9.3bn.
Frank O’Connor, the agency’s director of funding and debt management signalled in a recent interview the target range was flexible, comments that were interpreted by some in the market as a sign the NTMA intends to raise more than €13bn.

Others have insisted it merely provides greater flexibility.
Davy’s Barry Nangle pointed out that Ireland is now viewed as a core European economy given the yields are “marginally higher” than the ECB base rate.

He also pointed out that as yields, which move inversely to prices, continue to fall on French and Dutch paper, Irish bonds look even more attractive.
The NTMA’s latest auction cones as voters in the U.K head to the polls in an election that is expected to deliver a thumping victory for the Conservative party.

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