Ireland re-enters bond markets - 5.2bn in new funding acquired
27 July 2012
Conall Mac Coille, Chief economist
Ireland has raised 4.2bn of new debt in bond markets. New debt issuance is equivalent to 2.6% of GDP. In addition, 1bn of 2013 and 2014 bonds were swapped into the new 2017 and 2020 bonds. Total issuance was 5.2bn. The Minister for Finance indicated that the majority of demand came from foreign investors.
The 5.2bn raised yesterday (July 26th) reduces Ireland's market financing needs through 2013-2014 from 31.8bn to 26.5bn. In addition, Ireland's 13.5bn of cash balances are available for sovereign funding needs.
Additional policy actions will also help funding needs. The Irish Central Bank governor has indicated that European support to relieve the 3.1bn requirement for IBRC's promissory notes is now likely.
The NTMA plans to expand Treasury bill issuance and is targetting up to 5bn of funding from domestic pension funds. If NTMA's targets are met, the Irish sovereign may only need to raise 13.6bn to end-2014 while maintaining a healthy buffer of 10bn cash balances.
The 5.9% yield is still too high to guarantee debt sustainability, and risks to nominal GDP growth remain. However, the sale beat expectations and shows that markets approve of Ireland's ability to meet budget targets.
For further detail, see our research report issued July 26th.