Ireland sells 4 billion euros of debut bond

5th January 2017

Ireland raised 4 billion euros at its first 20-year bond sale on Wednesday, drawing more than twice as much demand in a syndicated deal that covered over a third of its minimum funding needs for the year.

Kicking off its annual funding drive with an issue placed via a syndicate of banks for the fifth year in a row, Ireland sold the debt at a yield of 1.73 percent having received bids of over 11 billion euros, the country’s debt agency said.

Ireland has taken advantage of record low funding rates over the past two years to issue longer-dated debt at progressively lower cost, stretching out the maturity of its stock of debt by selling 15-, 30- and a small amount of 100-year bonds.

“We wanted to stretch out the curve a bit more and have a few more choices when we come to auction bonds,” National Treasury Management Agency Director of Funding Frank O’Connor told reporters in a conference call. “The feedback we had (from investors) was that they were looking for a little bit more (long-duration) from us. We had in our mind 3 billion, which would be a good transaction, but the strength of the book allowed us to do 4.”

The NTMA plans to issue between 9 billion and 13 billion euros of long-term debt in 2017 in a slight increase on 2016 and said last month that would include at least one syndicated deal. O’Connor said it was too early to say whether there would be room for a second syndicated bond offering in 2017

Smaller euro zone states often use syndication to broaden the investor base for their bonds and compete with big issuers. Fund managers, pension funds, insurers and banks – including central banks – accounted for most of the book, 97 percent of which was taken up by overseas investors, O’Connor said.

The deal will also help alleviate the pressure on Ireland’s ability to access the European Central Bank’s quantitative easing stimulus programme by increasing the amount of eligible debt that can be purchased and benefit from the extension of QE.

The ECB last month cut its purchases of Irish bonds short of the level its rules dictate, data showed on Tuesday. O’Connor said this did “not particularly” influence the size of Tuesday’s issue.

“Ireland was often thrown into the peripherals bucket, but at these spread levels it is clear that they are truly out of that,” said Lee Cumbes, head of public sector origination at Barclays, one of the lead managers on sale.