DUBLIN/LONDON: Ireland began selling a 7-year bond via syndication yesterday, setting it on course to cover as much as a third of its planned issuance for the year at record low borrowing costs below one percent.
Among the first eurozone countries to mandate banks to kick off their funding for the year, Ireland set guidance at 36 basis points over mid-swaps, a lead banker on the deal said. That implies a yield of less than 0.85 percent.
Bids in excess of ¤5.75bn had been received by 1100 GMT, the banker said. A market source told said on Tuesday that Ireland was likely to seek to raise ¤3bn to ¤4 bn, though traders said the amount could be higher.
In common with much of the rest of the eurozone, yields on Irish bonds have fallen sharply in the past year, aided by an economic recovery which is likely to have seen Ireland’s economy grow faster than any other European Union country in 2014.
The cost of borrowing 10-year debt issued by Dublin on secondary markets was near record lows at 1.18 percent yesterday, having barely reacted to the calling of snap elections in Greece, which hit bonds from some other peripheral euro zone countries.
Greek 10-year bond yields rose above 10 percent for the first time since September 2013 as Irish debt moves closer to perceived safer bets such as Belgium, which was selling 10-year debt at 11 basis points over mid-swaps yesterday.
Fully pre-funded for the rest of 2015, Dublin plans to issue ¤12bn to ¤15bn of long-term bonds this year. It said last month it would include at least one syndicated issue.
As well as beginning to cover its funding requirements for 2016, Ireland needs to raise debt this year to finish refinancing the majority of its bailout loans from the International Monetary Fund.
Dublin plans to use cheaper market funding to replace more than ¤18bn of the money it borrowed in 2010 as part of a three-year bailout. It repaid ¤9bn last month to start reducing the cost of carrying national debt set to remain above 100 percent of annual economic output until 2018.
Ireland raised 3.75 billion euros towards making the first repayment by selling new 15-year debt at a record-low yield of 2.49 percent in November.
Barclays, Davy, HSBC, J.P. Morgan, Nomura and Royal Bank of Scotland were mandated as joint lead managers for the issue.
Reuters
