Ireland said yesterday it raised €1.5 billion as planned, in an oversubscribed bond auction seen as a crucial test of investor confidence in the troubled nation’s economy.
The government public debt agency said it placed bonds worth €500 million due in 2014, with demand 5.1 times greater than the amount offered.
“The National Treasury Management Agency today raised €1.5 billion through its ninth bond auction of the year,” the NTMA said.
“With the success of this auction Ireland has now achieved its target of raising €20 billion from the bond markets in 2010.
“Allowing for cash balances, retail debt and the long-term funding carried over from last year, the exchequer is now fully funded through the first half of 2011,” it added.
The bonds carried a yield of 4.767 per cent, up from 3.627 per cent at a similar previous operation.
The government also placed eight-year bonds worth €1 billion, 2.9 times oversubscribed, at a rate of 6.023 per cent, which compared with 5.088 per cent at a previous issue.
At the same time yesterday, Greece and Spain also announced a successful round of bond auctions.
Ireland’s sale comes as it fights speculation that it may have to seek assistance from the International Monetary Fund or European Union due to the strains on its public finances.
But the European Financial Stability Facility, set up to aid debt-laden eurozone countries, does not think Ireland or Portugal will ask for help, EFSF head Klaus Regling said in an interview yesterday.
The two countries are nonetheless under heavy pressure, along with Greece which benefits from a separate European Union and International Monetary Fund rescue plan.
“I do not think the worst will happen and that we will have to borrow” to help Dublin and Lisbon, Mr Regling told the German business daily Handelsblatt.
“Sometimes markets overreact,” Mr Regling said, referring to how the three weaker eurozone countries face soaring costs to borrow on the financial markets as they try to put their public finances in order.
Irish Central bank governor Patrick Honohan on Monday hit out at “alarmist commentary” regarding the country’s economic difficulties.
Mr Honohan insisted that the cost of dealing with the deficit and its banking crisis was “managable from the point of view of the national public finances and a good deal less than some alarmist commentary had suggested.”
Nonetheless, the cost of borrowing for Ireland remains high, with investors concerned about the overall cost of fixing the banking sector – particularly the bailout of Anglo Irish Bank – and the public finances.
“At the crux of the jitters in Ireland is the uncertainty about how much Anglo Irish Bank will cost the taxpayer,” said Rabobank analyst Jane Foley.
“The government has promised a full statement by October. Given that the market is clamouring for transparency, there is talk that a statement could come this week.”
The Irish government has said it plans to split state-rescued Anglo Irish Bank, with one part holding its bad loans eventually being sold or wound down, in the hope of satisfying the EU.
Anglo Irish reported a pre-tax loss of €8.2 billion in the six months to June, on top of €12.7 billion for the whole of 2009, the biggest-ever losses in Irish corporate history.