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Updated, 18:06
IRELAND HAS RAISED almost €4.2 billion in its first sale of long-term government bonds since before it was forced into an EU-IMF bailout.
The National Treasury Management Agency said investors had bought €4.19 billion of new bonds, due to be repaid in October 2017 and October 2020, as part of its operations earlier today.
In addition, investors swapped €1.04 billion of existing bonds – which were due to be repaid in either 2013 or 2014 – for the later ones, which carry a higher interest rate.
The issue of the new long-term bonds marks the first time Ireland has raised cash on a long-term basis, independent of the EU-IMF bailout programme, since September 2010.
The bonds maturing in 2020 will carry an annual interest rate of 6.1 per cent, while the loans up for repayment in 2017 carry interest of 5.9 per cent.
The NTMA, which is responsible for managing Ireland’s national debt and funding needs, had surprised many investors when it announced the swap-and-sell arrangements this morning.
This evening the Minister for Finance, Michael Noonan, said the return to markets was a “very welcome and positive development”, and said the majority of the demand for the new debts came from foreign investors.
“The strong demand and the fact that over €4 billion of this is new money is a significant step for Ireland in regaining our economic sovereignty,” he said.
Noonan said the auction showed investors were reacting favourably to the commitment by EU heads of government to break the link between banking debt and sovereign debt, but warned that this commitment needed to be delivered upon if Ireland was to return to the markets on a full-time basis.
NTMA John Corrigan said he was “very pleased” with how the activity had been received, “particularly the fact that investors committed more than €4 billion of new money to our first long-term issuance since September 2010.”
He added that the return to independent borrowing was a “very significant step for Ireland on the way to full bond market access”.
He also said that today’s exercises meant the NTMA now had a “significant proportion” of the €8.2 billion it needed to repay a tranche of bonds which are due to mature in January 2014 – a point which had previously been seen as a significant “funding cliff”.
The amount raised is similar to the amounts Ireland had routinely raised in monthly bond auctions prior to September 2010, after which it opted against issuing further bonds due to the rising costs of borrowing that ultimately sent Ireland into its €67.5 billion bailout.
Though the interest rates paid by the NTMA today are down significantly on the rates it would have paid on second-hand markets only months ago, its rates are still higher than they had been before the bailout was needed – and are still far higher than other eurozone countries pay.
An 8-year loan for Germany, similar to the 2020 bond issued by Ireland today, would only cost it an annual interest rate of 0.963 per cent. The UK would pay interest of 1.09 per cent, while France would pay 1.831 per cent.
The costs are not much higher than what Italy would pay, though – with the Italian government being charged 5.807 on second-hand markets this evening – while Spain would pay more than Ireland did, at 6.742 per cent.
Earlier this month, the NTMA sold €500 million of government debt in the form of three-month treasury bills which are different to bonds in that they run over a much shorter period of time.
The ‘T-bills’ reached a yield of 1.8 per cent – beating the 2 per cent interest rate they were expected to pay – and were over-subscribed.
The NTMA had said last week that it planned three to four more auctions of short-term treasury bills before the end of the year, and that “market conditions permitting” it planned to issue a more conventional long-term bond, like that sold today.
Additional reporting by Hugh O’Connell
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Great stuff – I’m heading out now to get a job as a site labourer, buy a €650k house in Kildare and stick a deposit on a new BMW M3! Celtic Tiger is back baby!
You could buy the whole of Kildare for 650k at today’s prices
Only if Angela sold it to ya…
€4.19 Billion
Whats that for Mikey?
€4 Billion to pay yourself and your cronies exorbitant salaries so that leaves just .19 Billion to ineptly squander?
We’ve got money? Break out the champagne! I’ve learned nothing! Nothing, I tells ya!
The ECB needs to force down our cost of borrowing to a sustainable 5%. Borrowing at 5.9% is not sustainable for a country like Ireland because our public finances remain depressed.
How do you propose the ECB ‘force down’ the cost? Buy Irish bonds? Kind of missing the point of testing the market……
ECB’s plans to make the ESM a permanent thing will be affected by today’s Supreme Court decision to refer three major questions about the ESM’s legality to the ECJ http://www.thomaspringle.ie/?p=1031
I presume that these bonds were bought by the ECB or a bank acting on pressure/instruction.
Until the ECB take the bank debt off the state books then we are going nowhere in terms of borrowing on the market or dealing with this crisis.
The ECB needs a god news story, here it is.
We are last weeks news, the impending bailouts of Spain and Italy, the broken banking systems of Germany and France, they are the big news stories now.
The more of these naysayers and negativity merchants around the longer it will retake before we recover because economic success is built around sentiment and most of the above belongs in a funeral home!
More debt to pay off debt. Yeah Mick, i guess it suits some to just turn a blind eye to the reality of the here and now.
Perhaps the fairies will fix our debt problems…just ain’t gonna happen.
Band aid and duct tape economics don’t work
I suggest we Panic!
I find it strange that we are even doing this. Is not the IMF lending to us a lower rates than this. Currently we do not need the money and are funded up to middle of 2013, by which time the euro could well possibly collapse and then no one will want to invest in us. This smacks of something FG/LABthey can use as PR to say, “hey look at what we done” ” we got Ireland back onto the markets”…
when the time comes for us to need to borrow money then that will be the real test and all of this means absolutely nothing
This crisis is the result of monetary dysfunction, which was created 40 years ago and began unwinding in 2008.
“Panics do not destroy capital; they merely reveal the extent to which it has been destroyed by its betrayal into hopelessly unproductive works.”
–John Mills, ‘Credit Cycles and the Origin of Commercial Panics’
For those that can take the time it is explained here.
http://www.peakprosperity.com/crashcourse
There are a number of events that will occur in the coming months and years.
-Vast amounts of debt will not be repaid and cannot
-Major currencies will fail
-Western nation states will collapse
-Vast amounts of wealth will be destroyed
The political elite have already decided to place the burden of losses on their citizens, while protecting banks and their bondholders at all costs.
At the moment the citizens of periphery nations have been forced to take the greatest losses. However, in the near future this burden will be extended to the citizens of France, Germany, Holland and other core nations.
Ordinary people need to prepare for what is coming. They need to understand the nature of the systemic dysfunction and corruption. Western political systems no longer act in the interest of their citizens.
Market crashes/panics aren’t simply episodes of the mass destruction of wealth, but episodes where the greatest transfer of wealth within societies and between societies occurs. This means that those who are prepared can exploit opportunities that will be presented. Those that aren’t, are in danger of losing everything.
“For those of us who understand what is unfolding, it is an amazing opportunity to prosper and thrive because the greatest transfer of wealth from those that hold their wealth in paper to those that don’t is firmly underway. As this is priced into markets, “volatility” shall reign supreme as the Ship of Fools tries to elude its fate, driving markets (stocks, bonds, currencies, commodities, natural resources, energy) up, down and sideways as they seek shelter from the unfolding storms and maelstroms. But there is no escape as they have failed to learn history’s lessons and are doomed to repeat them. For the prepared investor, the opportunities are immense.”
Ty Andros
@ Simon Barnes – it isn’t all that strange really. It’s quite sensible to try to see whether there is an appetite for bonds and whether we can hope to enter the markets properly when the Troika funding runs out. It means we can plan accordingly. If the market shows no appetite then we probably have to start thinking about other forms of funding for example from a second bail out.
It just wouldn’t make any sense to wait until every cent is gone before you start looking for where the rest will come from.
Mick Collins
You are kidding no one . People are tired and fed up worried and broke. Why don’t you take a leaf out of your own comments list, because quite frankly you are running on fumes like the rest of the FG and Labour yes men and women who can not use the brains they were born with to see exactly what this government are doing.
I may not be as well educated or as worldly wise , but I know sh1t when I smell it .
This government are a disaster from beginning to end and the sooner they stop trying to sell us sound bites the better. My understanding of the above article is that old bonds were swapped for new bonds and we really have not made money , only we do not have to repay them til 2017 and 2020………. It was the short term treasury bills that made a few bob earlier this month. .
Eileen, 4 billion is new money. 1 billion is swapped.
This doesn’t appear to be issuing new debt – on the face of it, it looks like debt rollover.
We are asking existing sovereign bond holders, who probably hold 4% bonds, whether they’d take a 6% bond in a roll over instead of payment.
Now, we know we can get that 6% from our bailout fund, and just repay these holders of sovereign bonds instead, but if we can get the guys to take a rollover at the same rate, then we’ll leave that money in our bailout facility.
This is a good idea, because it buys us time on the bailout facility. We have a number we can draw down, and this debt rollover will not then need to be counted in the roll over. It’s good because we don’t need to lean on our European neighbours to roll over existing debt, just to issue new debt.
But if it works, it doesn’t for a second mean that the bondmarkets are open to us again. We’re offering a deal that says:
“Hey, the world didn’t end, we didn’t default, your bond is maturing, would you like another one at our new prevailing interest rate?”.
This is not the same as being able to offer bonds to the open market and expect a number of subscribers.
Why has this gotten 2 red thumbs. It is exactly what happened and is well written and clearly explained.
Probably because the announcement is not just a debt rollover (although that is part of it). New bonds are also being sold to primary dealers.
Ok
Ronan, your always spot on and your comments on these matters always provides more clarity for me. Thank you.
All Imperial conquests were paid and funded by slavery.Slavery was abolished in 1833 by an act of Parliament.
What we have now is debt,which is slavery.
Speak for yourself there John. I’m sure there are plenty of savy Irishmen/women that understand the economics of the country especially after what we are currently going through. Also borrowing money to run a country is perfectly normal, seeing as tax take is usually done once a year and a year behind, then how do you expect to pay for public services and weekly wages.
Plenty of people do understand – but the majority of the electorate haven’t a clue. But everyone understands the concept of debt.
Let’s try and educate everyone as much as possible so that they can make informed decisions on whether they believe borrowing even more money is a good thing or not.
It’s Impossible For Irish Government To Grow It’s Way Back To Solvency.
Whats it gonna take to realize that?
Politicians and public policy wonks who see rates at record lows and perceive a Keynesian “Borrow-and-spend-fest” as once again the solution to borrowing-and-spending too much.
If ‘expansionary austerity’ worked, then Europe would now be booming by now.
Well.. Whodathunkit lol
I’m hugely confused by your comment!
We haven’t been trying to grow our way back to solvency at all!.We’ve been cutting and increasing taxes- i.e. A policy of austerity in a period of recession; the complete opposite of Keynesian economics!
Also I don’t know what you mean by rates at record lows? Certainly not for the Sovereign to borrow, which is why we’re in an EU-IMF bailout as we can’t afford to borrow on the markets.
If you mean a record low from the private sector perspective, then this isn’t Keynesian economics as he argues it is the Sovereign, not the private sector that should increase spending in a recession. In any case, the private sector in Ireland can’t take advantage of these low rates as the banks simply won’t lend to them out of fear of losing even more money.
It’s a good indictment of the SENTIMENT towards Ireland at present. It demonstrates a CONFIDENCE in the country from foreign investors. Those same words that SF and the lefties were laughing at not so long ago. Confidence is everything…
So, fine gael has handed over 25 billion to bankers and bondholders to give the markets enough ‘confidence’ to lend us 5 billion at a reasonable rate towards a funding shortfall of 18 billion.
Did inda leave his primary school teacher job because he sucked at basic math??
Too Trueleft do you think the 5bn is all he wanted? He wants to restore confidence in the long-term.
Market lending rates are not based on indas mystical ‘confidence’ (or, to give it its real name, a cover story for pilfering our money), they’re based on our ability to repay given our financial position at that particular point in time. Handing money to unguaranteed bondholders instead of decreasing the debt overhang makes it less likely we can meet those future commitments to repay and therefore does the opposite. If you think the people calculating our borrowing rates are going ‘ fair play to the irish meeting their payments no matter how many families have to be put through the grinder’ instead of running projections on the likelihood we will be unable to repay the bonds we sold today, then you need your head examined.
Sentiment and confidence does NOT put food on the table. Nor does it HEAT a house or CURE a sick child etc . What is needed is REAL jobs, Real MONEY and less BS . Create JOBS. Pay people to WORK. Take people off the DOLE QUEUES. Reality !
Confidence leads to investment. Investment leads to jobs. Jobs lead to salaries. Salaries lead to consumer spending, tax revenue and food in the table. Economics via Yoda.
Eileen, without confidence, there’ll be none of those things. Trueleft, we all know you hate a good news story…
What are you on about Too Trueleft? I might have misunderstood you but you’re saying those who bought €5b of Irish bonds today were NOT calculating based on their view of our ability to repay?
So what you’re saying Trueleft, is that these investors have invested knowing they won’t be getting it back? And I need my head examined!!
Read my post again enda.
o’reilly, whether or not you need your head examined, you either need your memory examined because I have explained it to you many times in small digestible words, or you are being facetious.
“Market lending rates are not based on indas mystical ‘confidence’…, they’re based on our ability to repay given our financial position at that particular point in time.”
I agree that it is partially based on our current financial position. It is also based on investor confidence in our future ability to pay. And primarily the latter which is informed by the former.
“Handing money to unguaranteed bondholders instead of decreasing the debt overhang makes it less likely we can meet those future commitments to repay and therefore does the opposite.”
Paying those bondholders DOES reduce the debt burden (whether or not we should have assumed it in the first place is an entirely separate issue). So paying them improves our financial position.
“If you think the people calculating our borrowing rates are going ‘ fair play to the irish meeting their payments no matter how many families have to be put through the grinder’ instead of running projections on the likelihood we will be unable to repay the bonds we sold today, then you need your head examined.”
The cuts in spending and increases in taxes and charges allows us to pay in the future. Investors are concerned with our future ability. Because nobody knows what will happen in the future we talk of confidence. That’s pretty straightforward.
We NEED jobs FIRST , then the investment will come , JOBS FIRST . How often do this idiotic fools of a government need to be told this , The people have lost confidence IN this administration . The PEOPLE need to have jobs HERE . JOB CREATION is what is needed. Yes ok so they got old bonds swapped for new bonds to be paid off at a later date…That is not inspiring . Investment will come if this government can show they can create jobs rather than relying totally on outsiders to come in and magically improve our lot .
The last thing we need is a lot of outside investment which will only pay our work force sweatshop wages, or is this what our wonderful boys in their blue shirts want ? ……
“We NEED jobs FIRST , then the investment will come , JOBS FIRST.”
You most certainly have that backwards.
“Yes ok so they got old bonds swapped for new bonds to be paid off at a later date…That is not inspiring.”
As I said: 4bn is NEW money. 1bn has been swapped. I know you understand that.
“Investment will come if this government can show they can create jobs rather than relying totally on outsiders to come in and magically improve our lot .”
Create jobs doing what? What will they pay people with?
“The last thing we need is a lot of outside investment which will only pay our work force sweatshop wages, or is this what our wonderful boys in their blue shirts want ?”
We have a minimum wage. Are you genuinely asking the Government to create jobs out of thin air (without any money of their own) and pay the people wages which are significantly higher than the minimum?
Are you seriously contesting that paying unguaranteed unsecured AIB bondholders BILLIONS that doesn’t form part of the banking debt instead of using the money to pay down our debt burden is ‘paying down our debt burden?’
Is that what you’re claiming enda?
Again, it’s really hard to understand you.
But I am saying that the State accepted the obligation to pay the bank debts. As a result what you call “banking debt” has become sovereign debt. There is no factual, legal, financial, or economic distinction between the two. You might argue that there is some moral difference between them but according to those buying Irish bonds there is none. So the short answer (to what I think you’re asking) is yes.
And none of those debts are included as part of the payments being made to UNGUARANTEED bondholders. The clues in the word enda, UNGUARANTEED. They are not part of the guarantee. Paying them does not reduce the debt burden which resulted from the banking GUARANTEE as they are not part of it. Using the money we’re unnecessarily handing them to reduce the debt burden DOES reduce the debt burden.
The unguaranteed bonds have already been paid. You might say we shouldn’t have paid those. And I might very well agree with you but:
This €5bn has NOTHING to do with unguaranteed bonds.
Of course it does. We could use the billons paid to unguaranteed bondhoolders to either reduce the debt burden, lowering the rate we can borrow money, or else close the deficit, reducing trhe amount we need to borrow at the higher rate. Had we used the billions paid to reduce the debt burden incurred from covering the ‘guaranteed’ bondholders, we could have borrowed today at a lower rate as our balance sheet would be in better shape.
This is really basic stuff enda.
“We could use the billons paid to unguaranteed bondhoolders to either reduce the debt burden…”
You seem to mixing up the present and past tenses. We cannot use money we HAD to pay debts we HAVE.
“Had we used the billions paid to reduce the debt burden incurred from covering the ‘guaranteed’ bondholders, we could have borrowed today at a lower rate as our balance sheet would be in better shape.”
Maybe we should ask for it back? I’m sure those nice bondholders would be more than happy to oblige you. I agree we shouldn’t have paid those…but we did…so what are you talking about?
Oh boy. I’ll make it simple. We use the money we’re STILL handing to unguaranteed bondholders (another half billion next week for instance) to pay the debts incurred covering the guaranteed ones. We’re still handing it out, you know this right?
Would you like a pop-up book version enda?
There is only around 400m worth of unguaranteed bonds left to be paid. I don’t think you grasp what’s going on here. Bond buyers would laugh at 400m!!!! It wouldn’t have the slightest effect on bond yields. I think they’re concerned about the 120% of GDP.
Can’t spend the whole night trying to educate fools. I’m going to bed.
http://bondwatchireland.blogspot.ie/
Heres the list of bonds still to be paid.
You do realise those figures include secured, unsecured, guaranteed and unguaranteed bonds?
Don’t go trying to trick readers into thinking Ireland is paying more for unguaranteed bondholders than it is. I’ll say it one more time: 400m in unguarantted bonds left. There are, as your lovely little table points out, many many billions left to be paid. However, they are not unguaranteed bonds. They are what bond buyers are worried about as I said.
Yep. Just rubbishing your comments about the bondholders almost totally being paid. They have not, and the government has the option of not paying the unsecured ones still to be paid. Theres another huge chunk going out next week. These are just the facts enda. Try not to embarrass yourself further.
Enda = 8
Too Trueleft =0
I’ve a big problem with the headline of these types of news stories. The real story is “NTMA seeks to borrow another E500 million in long term debt”. The mechanism of how it borrows it is irrelevant.
However, the confusing headline that the NTMA “announces sale of long term irish govt bonds” only serves to mislead readers. Please try to keep the financial language as simple as possible so that readers won’t be mislead into thinking this is just some boring financial exercise.
For too long the Irish people have been hoodwinked into thinking that all these financial transactions are just boring jargon. However, people really wake up when it is explained to them exactly what is going on. And what is going on here is simply that the NTMA is seeking to borrow even more money.
Also – the headline photo of the Minister for Finance cheering is ridiculously biased and misleading. Seeking to borrow more money is not a cause for celebration. It should be a cause for embarrassment, as it means that the Irish government is spending more money than it has.
“And what is going on here is simply that the NTMA is seeking to borrow even more money.”
You must be some kind of revolutionary? Are you surprised that we are trying to borrow more money??
I mean seriously, that isn’t even a hidden agenda. Would you prefer if we didn’t borrow at all? Maybe the Irish tax payer would prefer to just pay off our entire indebtedness in one MAAAASSSIVE payment; kind of like a normal family paying off a massive mortgage one weekend when they just feel like it.
Every state borrows in order to pay day to day expenditure. The reason for the panic in the last few years has been the fear we would never be able to borrow on the market again and so be effectively be bankrupt. It is ridiculous to suggest that we should never borrow again
Lord Polonius wouldn’t agree.
The yield asked and the yield paid will will differ big time….Sticking the toe in the water is not the same as swimming with the Bondholder sharks….They will entice them back in with lowish yields, then tear the NTMA a new one…!!!
The sooner this German sponsored EU/Euro axis experiment sinks the better…!!!
Please explain your agenda?? What is your vision??
Declan – The sooner this German sponsored EU/Euro axis experiment sinks the better…!!!
Thats my vision…Rather we take our own medicine, than have the Germans/Troika ram it down our throats…!!!
I want @PeedOff to be our Leader. His sound economic advice is the way forward.
Let’s sink Europe and the Euro, that’ll get us out!! Won’t it?
Whatever..
D.A. Molony for most sarcastic comment of the week .. well done :-)
thank you simon. much appreciated
The State is not going to be be able to borrow off the markets for years. Why people think that a state head for 120% debt to GDP, a good 40% of that down to bank debt that the state should never have taken on is going to be considered a prospect to lend to.
In time most of the Euro zone will be avoided by the markets, who can blame them.? There are other countries offering decent returns with better prospects. An Irish default of some kind is a certainty. No country and people have ever had the levels of debt that we have. In a growing global economy it would right itself eventually but with the UK back in recession, America barely hanging on to growth, China having a massive slowdown and Germany hitting the wall, then it is not going to happen.
The G20 need to get together and put in place a progr. of debt write downs and investment. This is a global crisis and the EU/ECB does not have the ability, competence of finance to solve the crisis that the currency has created.
Bet ya the Germans after WW2 had it worse!
The Germans after ww2 had one of the largest, if not largest, debt write offs in history. Not to be confused with their debt write offs from the 30′s and and after ww1, which are only in top 5 record defaults.
Excellent News
Don’t leave us in suspense Darren, did you get engaged or what?
Four geniuses who belong on long stay institutions have had their say!
Bond market = more sovereign debt. This debt trap is accelerated by trojan horse economic advice by ex attorney general corporate CEOs. We receive virtual non existent money from the fractional reserve pyramid scheme of senior bond holders. In return we pay back our debt with real world national assets including utilities (Coilte, ESB, Bord Gas) and oil/gas. Democracy is key is this debt trap as politicians will not stop spending to stay in power. Every citizen for himself demands all his entitlements. Classic divide and conquer economics.
Treasury yields need to fall to at least 4% for a country like Ireland. That’s why the ECB needs to print more money to keep our borrowing costs stable. Going into the Euro was a disaster knowing we couldn’t monetize debt like the FED or the BOE. If we still had the Irish Pound, we could print money. That way, we wouldn’t be facing savage austerity.
does anyone else think that the oil find off cork was a ruse to raise bond prices?
Cynical! I like it.
lets be real here.nothing will happen till the usa comes out of recession.then things will start to happen.lets remember the usa is the worlds breadbasket.when people lose money they stop buyin,so manufacturers stop producing and employers stop hiring people.the usa will have to kick start before anything happens. fact
So does this mean that savings which are earning fa in interest will become totally worthless when the euro collapses?
You should buy Irish bonds. Decent yield.
Enda, the financial regulator will be after you for offering financial advice without being a regulated person to offer financial advice.
Luckily for me financial regulators haven’t a very strong track record. :)
Yes Enda, lucky you, unfortunately you are in a celebrity death match with too true left above who in standard left orthodoxy is banging on about the bank debt because its easy to bang on about and like a dog with a bone won n’t let it go!
have your say